National Debt, Why is Our Economy is Weak

Japan, Zimbabwe, Greece, Italy all have a debt to gross domestic product (the total of all goods and services produced by the people of that country) that exceeds 1.  That means that if they sold everything and applied it to their national debt, they could not pay it off.  That would seem to be the very definition of insolvency.  And the Euro zone is in recession.  Austerity has caused economies to remain slow, so there is no growth to provide incomes for the people.  We have read all about it in the news.  One thing they do not tell us is the countries doing better at their ratios.  France, Canada, and Germany all come in under 1, which means by liquidation, they could pay their debt.

The United States is also still solvent.  But our debt keeps climbing, and soon we fear we will be in the same situation as Japan, Greece, and Italy.  The free spending of the last several years has to be reigned in.  Our national spending originates, by law, in the US House of Representatives.  They may be influenced by the White House or the Senate, but it is their responsibility to originate spending bills.  The Senate then must agree, as does the President.  At that point money is spent.

There is an adage used by auto mechanics:  "pay me now, or pay me later", and the later usually costs more.  We also know that no mortgage lender would lend us more money than we earn, in fact it is usually less than half of what we earn they will lend.  So how does Washington justify this unreasonable amount of debt?  They don't. 

There is supposed to be a debt ceiling that the government can not cross.  That is designed to keep our debt manageable.  But when we have to continually raise it, the purpose is defeated.  In our personal lives, we see what happens when we fall too deeply into debt.  Our homes are foreclosed on, our cars repossessed.  We need to be careful with our money, or risk losing it all.  Is that not also a risk for government?  If we fail to meet debt payments is it possible that people to which we owe money to foreclose?  After all there are substantial assets owned by government.  How about the Old Faithful, brought to you by Germany?  Or how about The red woods, brought to you by the People's Liberation Army?  Are these possibilities?  Why wouldn't they be?

The Japanese debt has wrecked their country, yes they still have an economy, but it doesn't grow like it used to.  It is harder for them to bring jobs to younger people entering the job market.  Same in Europe, it is the young who will bear the burden.  Yet here we hear lip service to caring for the children.  The First Lady struggles to try to encourage good diet in schools.  If we are burdening them with debt, why worry?

The good news, if there is some, is we are not yet to a point of insolvency, but it is close.  What our leaders in Washington do, will affect future generations.  Should we hand to them a country that can, or a country that can't?  It will not be easy,  politicians do not like to say no.  In the 1980s, we as a nation started on a path to surplus. When we got there in the 1990s, there was no restraint by Congress to save those excesses for the future.  And they made no move to seriously try to pay down the debt.  Shame on them. And this is precisely why Keynesian Economics does not work. Our forefathers worked hard to pay off the debt of the Revolution.  The next generation worked hard to pay off other debt, and our economy thrived.  Since World War II, there has not been a similar attempt to pay down debt, instead we just let it ride, and that is through Democrat AND Republican administrations.

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We saw a story about Detroit.  Apparently Detroit is going to have to not honor pensions.  People worked diligently through their lives, with a promise.  But that is all it was, a promise.  Now when these people are old and some frail, can they go out to work again?  Is this the future of Social Security?  Yet IRAs are still there, but even they can be affected by this debt as our markets lose value.  So we the adults of our time are pushing our responsibilities on to our children and our parents, that seems rude to me.  And we spend all our time talking about illegal immigration, and other minutia that will not do anything but offer cover for the free spenders in Washington.

All wars are fought over economic inequalities, even our Civil War.  Is a new Civil War in our future?  Or a split of our country into several new countries?  Is that what we want?  Would that be good economically?  Unless We the People make a concerted call to our leaders, that may not be too far off base.  How do we call them?  The first wake up call is usually real effective if it happens at the ballot box.  We have the power to prevent these spend thrifts from enriching themselves on our tax money.  You have heard the rags to riches stories, middle class guy goes to Washington, makes a lot of money, leaves office to be a lobbyist, never stepping back to where he came from.  At least if we keep the door spinning, the potential of that would be minimized.

So to you, and especially to the Congress of the United States...

Spend Wisely!