A borrowed blessing?
Quick: Visualize nine trillion dollars. What do you see? A stack of thousand-dollar bills stretching into the stratosphere? Twice the value of all the goods and services produced in Japan last year? Eleven times the amount of U.S. dollars in circulation? $29,770.44 for every citizen in the United States?
Nine trillion dollars is a number so absurdly huge it's difficult to wrap your head around it, which makes it great fodder for amusing factoids. But every American should know the number well. It's the value of our federal government's debt.
When dealing with a bill as large as the one Uncle Sam has run up over the last two hundred years, mere factoids, as clever as they may be, fail to express the true magnitude of the national debt - or to offer any true understanding of why our national debt has bloated so large. Too often, politicians from all sides of the political spectrum toss around the complicated concept of national debt with fatal simplifications. To truly understand, we have to take a closer look at the size and composition of the national debt rather than simply dabbling in amusing arithmetic.
First, those of you alarmed by ""your share"" of the debt can sit back and take a breather - Uncle Sam won't be banging on your door demanding that you pay up any time soon. The figure of per capita national debt is a little misleading. Only about $5.3 trillion of our national debt is actually in the hands of the public, and much of that is actually owed from one government agency to another - we owe ourselves a big chunk of the debt. A major component is securities and bonds issued by the Treasury, important tools of the Federal Reserve for fighting inflation and regulating the money supply. The rest of the debt is intragovernmental - the liabilities our government owes from spending on programs like Medicare and Social Security. The national debt is also significantly different from your credit card bill or mortgage payment. As a sovereign nation, we don't have to put up with pesky collection agencies, because nobody can force us to cough up the cash we owe to countless individuals and nations across the world.
Some politicians warn of an oncoming debt apocalypse, where the government is bankrupted by entitlement spending, our great republic is crushed under a massive debt burden, and we have to give Texas to the Chinese. But as scary as tossing around $9 trillion sounds, they overlook another, equally important and gargantuan number: $14 trillion, the size of the U.S. economy. The fortunate truth is that the economy has been growing faster than we've been able to borrow, meaning a crisis is highly unlikely. In fact, it's entirely possible to keep rolling over the debt to future generations eternally.
The astronomical number of nine trillion isn't troubling because it's an unsustainable burden for the economy - it's not. It's troubling as a reminder of the swollen size of the federal government.
Before 1940, our national debt was a respectable amount measured in mere tens of billions of dollars. After World War II, however, Uncle Sam spent like a spoiled teenager with a no-limit credit card. Since then, even adjusted for inflation, that debt has expanded a hundredfold - and by the time the next president takes office, we'll tack on another zero, measuring it in the tens of trillions. Wasteful federal spending in the form of pork projects and useless bureaucracy contributes a significant amount to our debt.
So does the fact that our government has no incentive to balance the federal budget, and nobody to hold them accountable for their waste. In fact, the budget is zeroed not where our government assets equal our liabilities - a true zero. Rather, it is zeroed at previous year's budget, effectively ensuring that government spending will continue to bloat.
So what's wrong with running up an enormous tab? There's another important part of our national debt: the money the government is obligated to spend every year on entitlement programs like Social Security and Medicare. Unreformed entitlement programs consume a larger and larger portion of the federal budget each year, and we'll see a sharp increase in the next few years, as the first of the baby boomers begin to retire and demand their government payouts. In fact, Social Security, Medicare and Medicaid are expected to consume as much as 65 percent of the federal budget by 2040. Social Security has already become the largest government-funded program in the world. If we have any hope of decreasing our debt, we need to reform our feeble and failing entitlement programs.
Alexander Hamilton claimed that ""a national debt, if not excessive, will be to us a national blessing."" He was right - throughout history, the U.S. government has benefited from financing its operations with generous credit. But a nine trillion dollar bill is a sobering reminder of the size and scope of our federal government. If we want to downsize debt, we'll also have to downsize our nation's biggest debtor: the federal government.
Connor Mendenhall is a sophomore majoring in economics and international studies. He can be reached at email@example.com.