On Jan. 9, the federal governments debt officially surpassed $15 trillionan amount larger than the total annual output of the U.S. economy.
Worse, the debt is increasing. Approval of the Budget Control Act last August was a thinly veiled Band-Aid.
At present, the Obama administration projects total debt to increase by $26 trillion in 10 yearsmore than 15 percent higher than the projected $22.5 trillion in gross domestic product.
Indeed, the White House already has asked Congress to increase the debt limit an additional $1.2 trillion, a request the Associated Press describes as largely a formality.
Some politicians and pundits have tried to rationalize these unprecedented increases in indebtedness by arguing that we owe it to ourselves, by citing low interest rates, or by equating the federal debt to a familys mortgage. Such views are dangerous and misleading.
In traditional public finance, debt was reserved for long-term capital investments or for emergencies. But Americas annual deficits have been financing current consumption, not capital investment.
Italy financed similar expansions in publicly funded social programs with debt, and it is now experiencing yields on 10-year government bonds of more than 7 percent. The Greek government has behaved similarly and continues to verge on the brink of bankruptcy.
Thinking this level of debt is OK because we owe it to ourselves ignores the fact that government officials are using these instruments to provide benefits to some people at the expense of others.
The many beneficiaries of the huge increases in federal spending include large corporationssuch as Solyndra, General Motors, and the big banks and financial institutionsfederal entitlement recipients and providers, defense manufacturers, and government workers in a vast array of agencies.
While politicians have been spending profligately on these and other special interests, public debt has increased by at least $500 billion per year every year since 2003. More than 30 percent of the current totalsome $4.6 trillionhas been accumulated in just the past four years.
All the special interests benefiting from the current systemthe poor, the rich, the elderly, the crony capitalists and the green energy scammersare doing so at the expense of not only todays taxpayers, but their children and their childrens children, who will be stuck with the bill.
Despite all the political posturing in Washington and on the campaign trail, our oversized government continues to pack on the pounds at an alarming rate.
Those who argue that government spending now will produce future rapid growth in the economy do not see the increasing costsand dangersof big government.
Its like telling a dangerously overweight person that the extra calories he takes on by eating another double cheeseburger will give him more energy to work out later. It doesnt work that way.
If government werent wasting valuable resources, more money would be available for entrepreneurs to make productive investments.
Politicians will continue to spend until we force them to stop, pushing the expenses onto those who are not around yet to object. It is dangerous to believe that democracy alone will protect the prosperity of Americas next generation.
In 1795, James Madison warned that armies, debts and taxes are the instruments for bringing the many under the domination of the few.
Americans must demand that candidates for federal office this year pledge to oppose further deficit spending, tax increases, and accumulation of debt. Taxpayers are tired of the eleventh-hour phony compromises, gimmicks, broken promises and lies.
A constitutional amendment to force Congress to limit its spending should be a top priority for 2012.
A properly conceived balanced-budget amendment would send a strong signal to American families and investors, as well as the rest of the world, that America intends to get its fiscal house in order and avoid the devastating debt crisis facing Europe.
|Emily C. Skarbek is Research Fellow at the Independent Institute and Assistant Professor of Economics at San Jose State University.|