Okay, maybe I don't completely understand how government (ours) finance works. Apparently, I don't even have a clue, since none of what is transpiring over raising of the national debt ceiling makes much sense to me.
I always like to simplify things -- I guess my mind can only grasp simple concepts -- so in a nut shell here is the situation as I see it:
As a nation, we have borrowed ourselves into a $14.8 TRILLION hole, and now we need to extend the legally mandated debt ceiling to go deeper in debt because there is not enough money to keep the US government running. States and cities throughout the nation are also threatened with insolvency because they have spending programs that are now beyond their means because of the economy crash. Also due to the rotten economy, businesses are either failing or holding on to what capital they have and not expanding. Individuals are losing their jobs due to down-sizing and business failures causing them to deplete their savings and go deeper in debt just to survive.
Well there you have it. In one way or the other, we are all in debt and digging the hole deeper. So what can be done about it?
For individuals the options are few. You can file bankruptcy, try to re-schedule your debt, or simply let the creditors foreclose on whatever assets you have and take possession of them. For businesses, the options are similar. They can file bankruptcy, re-schedule their debt, or just close the doors and go under leaving the assets to the creditor. In either case the creditor is left with unpaid debt. Since creditors are in business to make money (what a concept!), they will simply pass on the loss, if they can.
For government entities, under-funded programs can either be cut or the revenue (taxes and fees) can be increased. Historically, during lean times government has simply raised the revenue. But during fat times, when the economy was good and revenues were in abundance, instead of cutting the tax rate, they thought up new ways to spend it. Surprise! The economy is in the toilet and the taxes and spending remain the same, but revenues are down. The typical socialist knee-jerk solution is to raise taxes. This only continues ratcheting up the cost on society of government and its size.
Sadly, besides the ratcheting up of size and costs, our federal government has borrowed money to fund expensive programs, and has become addicted to borrowing. Fourteen trillion, eight hundred billion dollars and change is currently what the United States owes domestic and foreign investors. I wrote out the figure in the hopes that it might seem more comprehensible. It's not. If I was $14.8 thousand in debt, it would be like financing an additional used car. At $14.8 million in debt, I would certainly choke and easily go bankrupt. Crank that number up by a magnitude of 6,000 and you can see what $14.8 trillion is. I saw somewhere that this equates to over some $500,000 per US citizen. I'm half a million dollars in debt without knowing it and without recourse!
Apparently the federal government's revenue can't begin to even match it's spending, let alone pay down it's debt.
As an individual burdened with a half million dollar debt and not merely enough coming in to begin to repay it, I would need to quit buying expensive items. I wouldn't go in debt to pay the interest on the loan and buy another new house. More likely, I would be looking at bankruptcy. Chapter 7 bankruptcy would just tell all the creditors, "suck it up." A chapter 13 bankruptcy judge would require me to drastically cut spending, sell assets, and re-schedule loan payments to at least fit my income. It is certain that I would need to cut up any credit cards in my wallet.
Our country can't tell its creditors to just suck it up, but why is it so hard to follow a more sensible procedure with our national debt and budget? Make it a law (even a constitutional amendment if necessary) that the annual federal budget must balance. In addition, cut any and all unessential programs and don't add more -- figuratively, tear up the national credit card. Sell off unessential assets and cut costs (privatize if the cost is less and it makes sense from a practical standpoint). Only when this has been substantially done and no other option exists, increase revenue (imagine telling your boss that you need a raise to pay down your debt -- fat chance).
Am I missing something? Do we actually need more debt? Can we afford more debt? At half million bucks per US citizen, I can't afford it, my kids can't afford it, and my grand-kids can't afford it. Lets get real!
