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Debt: The New Religion

When our nation is faced with a presumed “crisis”, the government immediately jumps into spending mode.  The prevailing wisdom cites that the more the government spends, the more quickly our nation emerges once again as the shining superpower of the world.  However, what do the numbers prove about how “super” or power truly is?

First, before we proceed onward, a graph that everyone who cares about being an informed voter should take a look at. It depicts the amount of debt we have as a percentage of our national economy as measured by the Gross Domestic Product or GDP.  The graph starts with the aftermath of the Revolutionary war and covers through 2011.  This was posted last year by Quartz (source) and is a site not known for a conservative slant.  It shows, clearly, that when the nation is faced with a crisis, the national debt skyrockets as the government spends money.

One more time to let that sink in: when the nation is faced with a crisis, the government spends money. Simple enough logic and we’re easily able to see why. During war the government spends, after wars spending starts to curtail as we repair the damage done.  History clearly shows that even after World War II, spending declines in a trend that isn’t any different in slope (though greater in magnitude) than previous events. However, there’s two major anomalies to this graph.

First, we notice that spending stops its downward trend in 1980 and begins to climb despite the absence of war or a “crisis” The second is an increase in spending before World War II – The Great Depression.  These two sharp increases do not equate to any large scale conflict.  They also do not ‘trend downwards’ afterwards; instead, they seem to act more like spending floors which keep the average level of spending much higher than in previous generations.

In other words, when government spending increases, it rarely returns back to its original level.  Without a doubt, our obsession with keeping a massive debt started in the 1930′s and has continued today without ever falling back below World War I levels. Another graph is quite revealing:

Every year since 1936, the United States government has spent more relative to its GDP than it did during World War I.

That means, as cited by the Congressional Budget Office from which these graphs are derived, we are poised to spend more money on daily government operations then we did in World War II – during “crisis mode”. 

As a percentage of our GDP, we’re currently spending a hair over 35%, and if the spending trend continues past 2030, our nation will spend over 100% just for daily operation of our government.  Remember, these are not some conservative blogger’s opinion – this is from the Congressional Budget Office.

Spain, Greece, Italy, France and other countries now face 25% unemployment, and they all share something in common: their government spending as a percentage of GDP was far too high for their free markets to bear. Currently, according to the CATO Institute, Spain’s “government spending as a share of GDP leapt 2.3 percentage points to 41.5% in just one year.” (source)  That’s not much higher than we are currently spending. 

Not only is government spending a threat to free market economies, the graph below depicts the dramatic increase in the rate of total accumulated debt:

Currently held federal debt (source: Wikipedia)

These numbers look worse when you see the total amount of debt we’ve accumulated has tripled in just twelve years. Worse, the occurrence of negative real interest rates (whereby the inflation rate is greater than the interest rate of the debt) prevents the debt from ballooning even more. So in theory, we should have a very low debt due to reasonable temporary spending during periods where borrowing money was cheaper than interest paid on it — but we don’t. We simply have a slightly smaller mountain of debt despite all free market forces at work.

Why not spend reasonably and leave ourselves extra slack for when a true crisis emerges? Simply put, we have accepted the Religion of Debt in America. We accept it for ourselves when we buy cars or gadgets that we cannot afford. We accept it when we are told home ownership is the American dream. We accept it when we attend expensive colleges and universities. And, we accept it when it comes to our government.

Common rhetoric about anarchists, communists, socialists, and crony capitalists all serve to distract from the one truth: no one in government has any interest in reducing our spending to pre-World War I levels.  Not Republicans, not Democrats.  Instead, both are big government and argue over whose government gets to spend the dollars.

If we can balance the budget or (gasp) create a small surplus, the national debt will begin to erode itself naturally. Through both fiscal responsibility and natural market forces (such as negative real interest rates) we can get back to a modest, manageable debt and stop wasting so many taxpayer dollars on interest payments or government pork projects.

Want further proof that debt is the religion of the US?

Gallup poll on the power of the federal government today (source)

That’s right. The same folks who claimed the government was too powerful when President Bush was in power now find themselves wanting more power.  It is important to note, both government spending and power of the federal government has only increased since 2003.

Our nation is so consumed with debating the rationale of spending and flexing the powerful arm of the federal government that nobody asks whether nor not we should. The question needs to be “should we?” instead of “how should we?”, and every election, millions of voters are tricked into blindly pulling the R or D lever.  If you vote for ‘the lesser evil’ or for a single party a majority of the time, you need to get out of the voting booth. You’re the problem.

It’s time to wake up, kill the rhetoric, and disassociate yourself from a party. 

Please, you’re killing us all with your religion.

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