Following the deal reached Wednesday to extend the federal debt ceiling – or another way to refer to it: an agreement to delay actually dealing with the very real and inevitable fiscal problems until some unknown date in the future, for more virtuous people (if they exist) to solve – a quite predictable but nonetheless shocking development occurred. Yesterday the people of the United States, at least those who are actually paying attention, saw our debt increase by an unprecedented single-day margin: $328 billion. That amount is roughly half of recent annual Defense budgets, accrued in just a few short hours.
To further put this into perspective, this single-day increase in the liabilities of our national balance sheet is equal to or greater than the entire reported 2012 gross domestic products (GDP) of 137 of the world’s countries, excluding those where data is unavailable such as Iran, Somalia, and Zimbabwe among others. Only 39 nations surpassed this single-day amount, despite having an additional 364 days of production and exchange to work with. While GDP as a measure is admittedly an imperfect contextual comparison, it nonetheless neatly conveys some sense of proportion and scale when considering just how large these numbers truly are in application. Some so-called first world nations (in the modern vernacular) whose GDPs match or fall below this increase in liability include:
Israel (HDI ranking: 16)
Denmark (HDI ranking: 15)
Finland (HDI ranking: 21)
Qatar (HDI ranking: 36)
New Zealand (HDI ranking: 6)
Kuwait (HDI ranking: 54)
Iceland (HDI ranking: 13)
Shockingly, or maybe not depending on one’s perspective, America’s latest debtor-in-chief brazenly insists that raising the debt ceiling “does not add a dime to our debt” with a straight face. But then, he can do so largely unchallenged as most Americans are far more intimately familiar with the goings on in Miley Cyrus’ life than they are with actual economics or the fiscal status of the largest bureaucracy ever created by man. After all, who really has the time to educate themselves on what is transpiring in the world and how it affects them anyway, what with Thursday Night Football back and all?
To be fair, it theoretically stands that raising the debt ceiling in and of itself does not add new debt, in much the same way that opening a new credit card limit does not in and of itself obligate the cardholder to incur more debt with it. Of course, such reasoning does not substantively represent fiscal reality or praxeology in any genuine way but instead reflects pure bookkeeping and newspeak. The overall debt is so massive now, a new record of $17.075 trillion, that outlays dedicated to servicing its interest alone is enough to entirely finance the yearly operations of most of the world’s nations (interest payments totaled $415.7 billion in fiscal year 2013 alone).
While it may seem intuitive enough to many, it is critically important to widely understand and recognize that there really exists no such thing as a “free lunch.” Given that all this debt must be financed long-term either through direct taxation of current and future (even unborn) generations, or through indirect taxation in the form of debt monetization-derived inflation (which virtually always hits future generations disproportionately), this credit will necessarily be financed in large part by Americans who have had no say in whether or not it should be accrued in the first place or how the money is ultimately spent. This reality spotlights the height of irresponsibility and myopia that characterize modern geopolitical Keynesian fiscal policies.
Consider for a moment whether or not we would find it fair or just to discover ourselves legally obligated to pay down debt and interest that our great-grandparents accumulated well before our parents or even their parents were born, on pain of legal enforcement. Generally, state contract laws obligate family members to inherit their relatives’ debt only if they willingly and knowingly assumed liability for it at some point prior to expiration, by co-signing for a loan, assuming payment(s), or the like. However, what if we had no say in if or why our families amassed their debt, or how much of it they incurred, while nonetheless assuming the balance of that debt in its entirety upon their death and for the rest of our lives? What if the balance that we were unable to terminate was then transferred over time to our children and to theirs? Who can stand up and proclaim that such an environment is ethical or legitimate? Yet this is analogously what we, as forebears of future generations, are doing to our descendants by incurring such massive amounts of debt that necessarily require unborn generations to be held at least partially, if not predominantly, responsible for. We are, in effect, mortgaging our descendants’ property and the fruit(s) of their labor for our current wants and desires.
Among various reasons, the United States were founded on a philosophy that taxation absent representation is among the more unethical behaviors in which the State can engage. Yet the only contextually substantive difference between the environment that preceded 1776 and modern America is that where fair and equitable representation on tax matters was precluded by way of geography and class in the former timeframe, it is now effectively inhibited by way of generational dictation and indenture. What people can claim to be virtuous or moral who laden their children and their children’s children with these burdens, and do so without their consent.
Thomas Jefferson is perhaps the foremost historical American figure with relation to fiscal issues and posterity:
Then no man can, by natural right, oblige the lands he occupied, or the persons who succeed him in that occupation, to the paiment [sic] of debts contracted by him. For if he could, he might, during his own life, eat up the usufruct of the lands for several generations to come, and then the lands would belong to the dead, and not to the living, which would be the reverse of our principle.
We believe, or we act as if we believed, that although an individual father cannot alienate the labor of his son, the aggregate body of fathers may alienate the labor of all their sons, of their posterity, in the aggregate, and oblige them to pay for all the enterprises, just or unjust, profitable or ruinous, into which our vices, our passions, or our personal interests may lead us. But I trust that this proposition needs only to be looked at by an American to be seen in its true point of view, and that we shall all consider ourselves unauthorized to saddle posterity with our debts, and morally bound to pay them ourselves; and consequently within what may be deemed the period of a generation, or the life of the majority (emphasis added).
Ought not then the right of each successive generation to be guarantied [sic] against the dissipations and corruptions of those preceding, by a fundamental provision in our constitution? And, if that has not been made, does it exist the less; there being between generation and generation, as Between [sic] nation and nation, no other law than that of nature? And is it the less dishonest to do what is wrong, because not expressly prohibited by written law? Let us hope our moral principles are not yet in that stage of degeneracy, and that in instituting the system of finance to be hereafter pursued, we shall adopt the only safe, the only lawful and honest one, of borrowing on such short terms of reimbursement of interest and principal as will fall within the accomplishment of our own lives (emphasis added).
As a society, we desperately need to awaken and recognize what kind of people we are today and subsequently decide what sort we wish to be tomorrow. We must seek to keep ourselves far more informed, embrace an ethical enlightenment, and cultivate the moral fiber necessary to do what is right and just rather than simply what is easy or expedient, or I fear we will necessarily but justifiably reap all of the very painful consequences our ignorance and/or indifference sows – or worse, our children will reap them in our stead.