Debt woe ignores reality
At the last news conference of his first term, President Obama poured contempt on any suggestion that the constitutional Treasury debt limit either be adhered to or that any agreed-to increases be offset by cuts in government spending.
Obama refused to publish any budget during his first term, but he increased Treasury debt by $4 trillion. To put this vast figure into some perspective, the past 4 trillion seconds have occupied more than 126,000 years.
The largest buyer of our Treasury debt is the Federal Reserve. According to Fed statistics as of Jan. 10, it holds $1.7 trillion in Treasury securities and another $1 trillion of largely toxic mortgages. This encumbers all Americans — especially the young — with an unbearable debt load, threatening poverty and suffering.
At today's abnormally low interest rates, the Treasury pays interest of $600 billion a year on its debt. At average historical rates, America will have to find $1 trillion a year for interest payments alone.
In 1902, Argentina challenged the United States as the world's second-richest economy, behind Great Britain. Adopting debt-financed socialist policies, Argentina's economy eventually collapsed. By the end of the 20th century, Argentina's inflation rate ran at more than 3,000 percent amid widespread poverty and hunger.
As most families recognize, this is simple housekeeping. If the household spending exceeds income, lifestyles can be sustained for a time by borrowing from banks, credit cards and mortgage companies. Eventually, however, limits are reached. Reality must be faced. Spending cuts must be made to service loans, let alone reduce debts.
If the head of a household goes to the bank demanding another increase in the credit limit, lenders are apt to become concerned and to tighten, rather than loosen, credit terms.
For decades, the United States has overspent its means. Motivated by re-election, past members of Congress have raised the nation's debt limit with scant regard to future generations. The time has come to curb government spending.
Having overspent by some $4 trillion over the last four years and secured a further $4 trillion over 10 years from the fiscal cliff negotiations, Obama now appears to want an open check.
Furthermore, he insists that Congress faces a “moral obligation” to raise the ceiling.
Senate Majority Leader Harry Reid, D-Nevada, has even suggested that Obama should bypass Congress to raise more debt.
Fed Chairman Ben Bernanke describes the debt ceiling as merely “symbolic.”
It is clear to all who take the time to look that the federal government's aggressive expansion and reckless overspending must be curtailed if financial chaos and economic disaster are to be avoided.
Over the past century, the Fed's manipulation has debased the dollar by over 98 percent. The Treasury has debts $1.2 trillion larger than the national Gross Domestic Product and has reached its Constitutional debt ceiling.
Instead of trying to find ways around this limit, Democrats and Republicans should curb their reckless spending policies. But without strict term limits will they have the courage?
John Browne, a former member of Britain's Parliament, is a financial and economics columnist for Trib Total Media. Email him at firstname.lastname@example.org.