The Debt Deception

The national and global discourse makes this association: Debt is to good financial practice as cancer is to good health. We’re now seeing the cancerous results of debt-centered financial practice worldwide, as countries are being eaten alive by debt, with some on the brink of collapse. We’ve been saying for decades that this day would come, and our reaping must follow our sowing.  But there’s a very personal aspect of this I have only recently realized.

We’ve all heard stories of a well-off married couple, man and wife (using an outdated definition of marriage, but sufficient for our purposes), where the man dies unexpectedly. Turns out that he had no life insurance. Turns out he had $50K in credit card debt. Turns out he mortgaged the house and wasted it all in Vegas. Turns out, after all the figures come in, the wife is now hundreds of thousands of dollars in debt. We shake our heads and murmur a tsk tsk. How could he?

After all, they were living pretty well. House on the lake. Vacation home in the mountains. Beautiful children. Pretty well indeed. Tsk tsk.

This story, is, of course, an illustration of what’s happening to us as a nation, and to other peoples of other nations. Our partner, government, is doing us wrong.  We lived our lives not completely ignorant of what was going on, but lazy enough not to stop it. We heard the warnings, but were not very motivated to heed them.  We heard about the fiscal cliff a few years ago, not realizing that we sailed off the cliff in the 1950s or 1960s, maybe before, and now we are in free fall. They say it’s not the fall that kills you, but the sudden stop at the bottom, and our partner cares nary a bit.

As I look back over my fifty-plus year life in America, growing up in a medium-sized city, attending average public schools, going to public college, and working regular jobs as a regular guy, I’m realizing that a large proportion of my America was bought with borrowed money. Think about all the things that massive debt spending has, in part, purchased.

  • Interstate and most other highways
  • Public utilities
  • Public schools
  • Moonwalks and space exploration
  • Agricultural advances
  • Basic scientific research
  • The Internet
  • All things retirement

Tax revenues and borrowed money have been mixed to pay for these items, the proportions being muddled, but we can get an idea by looking at the Federal deficit over the years. Since 1930, the government has run deficits in 74 of the 87 years.  (See historical figures published by OMB.) From 2006 to 2015, the average of deficits has been 770 billion dollars, per year.

Look at the items listed above, and ask how you have benefited from them in your life. Do you remember the construction of the Interstate Highway System? That was Federal money. Many public utility systems and public schools were financed in whole or part with Federal money. Did you take a shower today, with water from the public waterworks? We put men on the moon and sent probes to the outer planets using Federal money. 

Farm subsidies from the federal government have kept many farmers in business, long enough anyway to sell out to conglomerates. Most everything we eat contains high fructose corn syrup made from corn grown on federally subsidized farms.

Basic scientific research is financed greatly by the government. If you don’t believe me, dig around on the National Science Foundation website and read their research solicitations. Much of this research has led to advances improving our lives.

And of course the Internet started out as a DARPA project, government funded. How could we live without all that spam and porn?

The retirement item is listed because Congress has wasted all the Social Security collections, and the trust fund is empty. Seniors are being paid out of current receipts, which includes borrowed money. Everything from condo farms in Florida to packs of adult diapers at the grocery are being financed through this deficit spending.

Now think about your youth. In 1972, I was just getting my peach fuzz, listening to "American Pie" on my AM radio. The government ran a 23 billion dollar deficit that year, about 11% of receipts. Can I consider that 11% of my 1972 was purchased with borrowed money? Eleven percent of "American Pie", "Heart of Gold", and even "Nights in White Satin" (considering foreign aid)?

In 1975, the deficit was 73 billion dollars, or about 24% of receipts. Can I consider that 24% of my Schwinn ten-speed was purchased with borrowed money? Twenty-four percent of my high school books (only slightly used), "Pick Up the Pieces", and my Joe Walsh albums?

In 1980, I was sitting in gasoline lines, waiting to pump gas with 14% borrowed money. In 1985, I was renting an apartment for $270 per month, 29% of it borrowed money.

The list goes on. The most depressing part of this is the realization that the government may have, inadvertently, financed 24% of disco. Bah!

The average ratio of deficit and receipts over my life is 15%. Could it be that 15% of my life was just purchased on a credit card? Could it be that a good-sized chunk of American prosperity was simply borrowed by a bunch of overweight Congressmen on the appropriations committee? What about Americans on welfare who live their lives on 100% borrowed Federal government money?  Perhaps I’m lucky to have only suffered a15% devaluation.

We frequently hear conservatives pining for a return to the great America we grew up in. However, that America was bought on credit. A large part of it was not grounded in reality. We may never be able to recreate that, if we have to stick to a budget. 

It seems then that the cheat of budget deficits is not all financial. We’ve been given, at interest, experiences that sane people in a real world would never have had, simply due to the cost. When I watched Neil Armstrong step onto the lunar surface on Sunday, July 20, 1969, (I remember it well, in black and white) it never occurred to me that a big part of it was financed with debt, and the space program would have not existed in a responsible world.

On top of all that disillusionment, deficit spending has financed a whole bunch of bad things, such as global warming research, corporate bailouts, multiple wars, and the entire Obama administration. I would like to think that eliminating deficit spending would cut the bad stuff first, but I’m probably being naïve. 

This evening, think back over your life and consider all the things that were bought with borrowed money. Has this diminished the value and meaning of your life by some fraction? The America we loved was, at least partially, no better than an impulse buy. We long for the Beaver Cleaver days, knowing full well they were a fantasy. But the real life we had was also part fantasy!

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