By all accounts, the most pressing issue on voter’s minds for this upcoming election is the economy. To which we all say…DUH! However, to hear the rhetoric of President Obama and many of the GOP contenders, the problem with the economy is that our unemployment numbers are too high. If we can get America back working again, the economy will improve as the new workers will begin spending again. As such, we have the President touting his “jobs” bill and all of the GOP contenders unveiling their “jobs” plans.
The more I read on the subject, the more I am beginning to realize that all this talk about jobs is a smoke screen to obscure the more urgent problem with the economy — namely the national debt. This isn’t to say that unemployment isn’t an issue. We have 9.1% unemployment in the U.S. (more like 16% when you factor in underemployed and those who have quit looking for a job), which is the highest the unemployment rate has been since 1983. Unemployment is bad, really bad, but it pales in comparison to our out of control national debt. For example, let’s suppose President Obama (or President Romney, or President Perry, etc.) gets a “jobs” bill passed and the unemployment rate drops from 9.1% to a more reasonable 4.6% (2007 levels). Great! Question: How does this change the culture in Washington D.C. regarding spending and debt? It doesn’t. If anything, more people working means more tax revenue, and more tax revenue means more government spending. The debt still increases and the economic catastrophe is still on the horizon.
The debt problem is only now coming to the surface because of the unemployment problem. With higher unemployment, tax revenues have fallen and the budget deficit has grown, which makes the debt problem more visible. Higher employment will only give the politicians in Washington more reason to kick the can further down the road.
The United States is the world’s largest debtor nation. Let that soak in for a moment — the world’s largest debtor nation. Our national debt is currently sitting at $14.8 TRILLION. Our debt is 99% of our GDP (Gross Domestic Product). Think of GDP as an person’s income. What this means is that our debt to GDP ratio would be equivalent to a person having to pay out nearly all of his income to service his personal debt.
Another way to consider the problem our burgeoning national debt poses is to consider it in terms of the federal budget. For fiscal year 2011, the United States took in $2.3T in revenue. The federal budget deficit (the amount our expenditures exceed our revenues) for FY2011 is $1.3T. That means our federal expenditures — the amount of money our federal government spends — is $3.6T. Now it’s hard to conceive of numbers in the trillions, so let’s put this in terms we can handle. Suppose your annual income is $23,000. Over the course of the year, you ended up spending $36,000, which means you had to borrow $13,000 to cover the deficit. More than likely that $13,000 was placed on a credit card that currently has a balance of $148,000. If nothing changes, you will be adding $13,000 to your credit card balance every year. It shouldn’t take a rocket scientist to figure out that this is an unsustainable situation.
Now, if this scenario described your personal situation, what would you do to get out of that mess? Step #1 better be cut up the credit card! Step #2 would be to get your expenditures to fit within your income. You cannot spend more than you make. Step #3 might be to get a better job that pays more. But if you’re like me (and many other people raised in our consumer culture), the more you make, the more you’re liable to spend. Many people spend up to their income levels. That’s why step #3 shouldn’t be the first thing you do. The problem in this scenario isn’t an income problem, it’s a spending problem.
Here’s the thing that gets me. I can present this scenario to people, and they will understand it perfectly. Most people get the fact that you can’t spend more than you make and survive for long. The key to prosperity is saving money, not spending it. Yet when this principle is applied to our federal government, these same intelligent people somehow don’t think this applies to government spending. For example, I have some liberal and progressive friends (not many, but a few), and they think the problem with the economy is that the rich aren’t taxed enough. What we need to do is raise taxes on the “super-rich.” In other words, in the scenario I described above, these people would look at the situation ($23K in income, $36K in expenditures, $13K deficit and $148K debt) and say we need to make more money. Here’s the problem with that logic: What if I can’t find a job that earns me enough money to cover my expenditures? What if I only find a job that pays me $32K? It improves my situation, but I’m still putting $4K on the credit card each year. The debt doesn’t go down, it just grows at a slower rate. That’s the problem with trying to raise taxes. People will do whatever it takes to avoid higher taxes. Because of that, tax increases always raise less revenue than the projections forecast. You can’t tax your way out of this mess.
On the flip side, I have conservative friends who want to lower taxes to jump start the economy. Now, I’m all for lower taxes (in fact, I’m for NO taxes), but I don’t think you can lower taxes and solve this problem. Lower tax rates have proven in the past to generate economic growth and economic growth actually raises tax revenues as the tax base is broadened. But just like trying to raise revenues through tax increases, you haven’t taken care of the spending problem. We cut taxes in the 80’s under Ronald Reagan and in the 00’s under Bush II. In both cases, the economy grew, but we didn’t address the spending problem, so the deficits grew as well as the debt. Again, I’m all for lower taxes, but just lowering taxes is like taking a pay cut in the scenario presented above. Everybody in Washington is tackling this issue from a revenue perspective and not a spending perspective.
I believe, as I stated earlier, that the debt is the #1 problem we face in this country. If we don’t solve the debt problem, we will see systemic failure in the economy not only in this country, but worldwide. Debt is a moral issue, I truly believe this. This isn’t just a case of bad economic planning, this is a case of egregious immorality! Deficit spending and adding to the debt is a symptom of a culture that wants what it wants and wants it now! And our elected politicians are more than willing to promise what they can’t deliver to remain in power. In addition to this, we are passing a massive debt burden on to future generations. Please explain to me the morality of that?
The bible has a lot to say on issues of debt and the wise handling of money. In the book of Proverbs, we find the following:
The rich rules over the poor, and the borrower is the slave of the lender. (Proverbs 22:7)
Personally speaking, if you are in debt, you are poor; you have no real net worth. Furthermore, if you are deeply in debt, you are in effect the slave of your lender as you are basically working to pay off your debt. What applies to individuals also applies to governments. As mentioned earlier, the United States is the world’s largest debtor nation. We are in debt to our future generations and to those from whom we have borrowed money (mainly China). In a very real sense, we can no longer be called the “land of the free,” but should really be called “the land of the debtor-slaves.”
Now it’s not immoral to be in debt, but it is immoral to be in debt and do nothing to change the situation. Our politicians are too drunk on the power that comes with being in government and our population is too addicted to the handouts that the politicians promise. But if things don’t change quickly, we will be like Greece with riots in the street (they’re actually here if you’ve been following the Occupy Wall Street demonstrations).
The only moral solution to our economic problems is to get government spending under control. Aside from the fact that most of what the federal government is doing is not even authorized by the Constitution, the morally right thing to do is cut spending in line with revenues. Not only is it the moral thing to do, but it’s also the just thing to do. The federal government is spending our money. The government can generate no wealth of its own, it must first confiscate it from us in the form of taxation. On top of that, it rarely spends our money efficiently. Government spending is always inefficient and wasteful. I’m going to be more careless in spending your money than I would my own; especially if I had free reign to dip into your pocket anytime I wished. It is unjust to take money from us and spend it foolishly in ways to perpetuate your own power base. The federal government has betrayed our trust by getting us into this humungous debt hole and they want even more money from us to ‘solve’ the problem? When you combine immoral with unjust, you get evil; and that’s what this situation is — evil.
There is currently only one politician who is advocating for making real cuts in the budget and is committed to balancing the budget — not in 20 years, not in 10 years, not even in 5 years — in three years, and that politician is Ron Paul (you can read his budget proposal here). The reason Ron Paul is proposing such a budget that deals with the debt by getting our spending under control is because he is the only candidate who is a true advocate for individual liberty. He understands not only that to be in debt is to be a slave to your lender, he also understands the immorality and injustice of our growing debt crisis. It’s a real shame that our elected representatives don’t operate under these same principles.