Time to Stop the Debt Charade|
December 6, 2012
The crisis du jour in Washington now dominating the news, the so-called “fiscal
cliff”, is but the latest in seemingly endless political crises that we
shouldn’t be having.
We get two different kinds of problems in life. The real ones – the struggle to
work and improve the quality of our lives – and the ones we bring on ourselves
through poor behavior.
The more time we must deal with the latter type, the less time and energy we
have to deal with life’s real problems and challenges.
The political crises which emanate from Washington are invariably problems of
the type that result from poor behavior. And this latest, the “fiscal cliff”, is
Let’s recall that the automatic tax hikes and spending cuts that are scheduled
to occur January – the “fiscal cliff” – are the result of the failure of
Republicans and President Obama to agree on a budget deal as condition for
raising the debt ceiling last year.
Why do we have to keep raising the debt ceiling? Because politicians are afraid
to be honest with the American people and immediately raise taxes to pay for all
their new spending. So instead of raising taxes and paying for our new bills
when we incur them, they just borrow the money.
Anybody who doesn’t pay the full balance on their credit card bill each month
knows what this is about.
Except there’s one big difference. You run up your credit card bill on your own
account. You are the one that is on the line for your own bills.
Politicians run up bills on our account. We’re on the line for what they spend.
They could be honest. When they have their wonderful ideas about what they want
to spend our money on, they could go right to taxpayers and say we are going to
spend X for Y so we will raise your taxes Z to pay for it. OK?
They don’t do this because they know it is not okay. Politicians know that the
money they are spending ultimately will come out of every American household.
And if they go to those households, to those actually responsible to pay the
bills, and the heads of those households know they don’t have the money, they
will say “NO”. Don’t spend the money and don’t raise my taxes.
So politicians don’t ask.
And our constitution, which originally was supposed protect the property of
citizens, is now so degraded that they can do this.
They just spend the money and borrow, on our behalf – often from those overseas
like the Chinese – to pay the bills.
Then they tell the American people about all the great ideas they are spending
money on. Bail out companies that have failed. Green energy. Extend unemployment
benefits so you can collect for four years. And so on.
It all sounds so wonderful and innovative and compassionate. And even better –
somebody else is paying for it all. We think.
Now our debt, at over $16 trillion, is bigger than our whole economy. More than
100% of our GDP.
Investment guru Bill Gross, of PIMCO in Newport Beach, California, has been
writing that the “new normal” for economic growth in the US will be below its
What is one of the major reasons why? He cites research by Harvard economists
Carmen Reinhart and Ken Rogoff which shows that “for the past 200 years, once a
country exceeded 90 percent debt/GDP ratio, economic growth slowed by nearly 2
percent….for an average duration of nearly a decade.”
Part of President Obama’s proposal to bypass the “fiscal cliff” is to get rid of
the requirement that Congress must approve increases in the debt limit. I wonder
It’s time for responsible behavior and hard choices. If we can’t just cut
spending, let the “fiscal cliff” kick in.
Star Parker is founder and president of CURE, the Center for Urban Renewal and
Education, a 501c3 think tank which explores and promotes market based public
policy to fight poverty, as well as author of the newly revised Uncle Sam's
Plantation: How Big Government Enslaves America's Poor and What We Can do About