Debt Debate is Nonsense

The best way to understand the debt ceiling crisis is to put it into terms that the average person can understand.

Imagine that you are hopelessly in debt and spending 60% more than you make each month. You have maxed out your credit cards and have no money to make this month’s mortgage payment. Miraculously in the mail comes a new credit card enabling you to make the mortgage payment.

Voila! Problem solved! Now let’s get back to spending. In a nutshell that is what the debt ceiling debate is about.

Both parties want a new credit card. Neither wants to correct the problems that brought us to this point. The Republicans want to provide a new credit card with a lower limit than the Democrats. Dems want one that will not max out until after the 2012 elections. Both give lip service to spending cuts but neither is serious. The cuts discussed are equivalent to turning out a light when you move from one room in the house to another. When you are going to lose your house, marginally cutting the electric bill does nothing.

Both want the new credit card so that you won’t lose the house this month. Neither is willing to make the changes that will prevent foreclosure on the house.

The analogy is imperfect in the sense that passing a higher debt ceiling is no guarantee of additional borrowing power. Markets may be unwilling to lend to a profligate who refuses to face up to his problems.

To see the actual government numbers, see Joel Bowman’s piece on Keeping Pace With a Declining Empire. He summarizes where we are and where we are headed:

Thus far, the United States has incurred an impressive $14.3 trillion in public debt, “subject to limit,” as they say. Put another way, that’s about $46K per citizen, or $130K per taxpayer. At current rates, those figures will jump to $22.9 trillion by 2015; $70K per citizen, or almost $190k per taxpayer…assuming there are still working stones from which the politicians on Capitol Hill can extract blood four years from now.

His figures do not include the major problems — social security and medicare. These are estimated to be over seven to eight times the debt.

Ah, but it was worth it. Er, no according to Mr. Bowman:

And what do these geniuses have to show for all of their greasy-mitted stimulus spending, for their various bailout programs and phony-baloney make-work schemes? What, in other words, does a few trillion dollars worth of other people’s money – some stolen, the rest begged and borrowed – buy you these days? More jobs? A rebound in the housing market? A new suit and tie? Any measure of honest, good-for-something growth? A – dare we even say the word – “recovery”?

Not from the looks of it. Not even by the government’s own accounting!

The debt debate wastes time while the country descends into bankruptcy.