Empire of Debt
Soaring debt is not just an unfortunate byproduct of Big Government. Our government empire is made of debt. It’s the mortar that holds all the bricks together.
Debt is not universally interpreted as a sign of failure on the part of government planners. On the contrary, it becomes a weapon used to demand more taxes. The same politicians who spent $1.7 trillion more than they collected, in just this year alone, say the problem is that private citizens are not paying enough. Democrats will not even begin to discuss minimal fiscal restraint unless they get a tax hike… and they claim the urgency of this tax increase is irresistible because of the huge national debt they have created.
Combining federal, state, and local taxes, the government already takes or controls over half of what the private sector produces. Now they want more. That is the demand of an imperial conqueror, not a humble public servant.
Two major credit agencies, Standard & Poor’s and Moody’s, have issued warnings that they will downgrade America’s credit rating if the payment of interest on our national debt is not made. They have reason to fear this, because President Obama and Treasury Secretary Tim Geithner have explicitly threatened to do it.
There’s no logical reason for debt service to be threatened, because it costs about $29 billion per month, and the federal government collects $200 billion a month in revenue. The government’s financial obligations are in jeopardy only because the President says he will spend all of the money on other things, willfully refusing to pay interest on the debt.
If America’s credit rating is reduced, the cost of debt service will increase by billions of dollars each year, resulting in even greater insolvency… which will jeopardize our credit rating again. At the far end of this death spiral lie the ruins of Greece, which pays more than double the interest rate America does. That would quickly increase our debt interest payments past a trillion dollars per year. The entire current federal budget would be consumed by interest payments in short order.
All of this is a feature, not a bug, for the Empire of Debt. The $350 billion per year we pay in interest, to service the titanic national debt our ruling class has accumulated, is being used as a weapon against us, to panic us into quiet submission to higher tax rates.
Do you dislike giving international credit agencies like Moody’s and S&P such powerful influence over the domestic politics that control over half our economy? Tough. That’s one of the inevitable results of carrying $14 trillion in debt.
If we refuse to let the Empire of Debt grow larger, it will have to immediately slash government spending by 44%. This, we are told, will result in a massive surge of unemployment, as thousands of federal employees lose their jobs. In other words, the Empire has been using those gigantic annual deficits to hire a huge number of people… and if you insist on spending cuts, you will be held accountable for putting them on the unemployment lines… where, of course, more federal spending will be needed, to pay their unemployment benefits.
High corporate and individual tax rates lead to high unemployment rates. If you suggest reducing those tax rates to spur private-sector growth and lower unemployment, you will be accused of making the debt situation worse. That wouldn’t be very intimidating if the national debt was low. Why not lower those taxes and see if the resulting growth generated more net revenue at the lower rates?
But because the political class has made the national debt so high, it is able to insist that taking a chance on the power of liberty is an irresponsible gamble. Because the government lives so far beyond its means, it would be irresponsible to provide it with reduced means.
This is how we have reached the madness of a moment when the national debt is used as an argument against spending reductions, or growth-oriented tax and regulatory policies. The insane problem becomes a weapon against rational solutions.
If President Obama and the Democrats win the debt-ceiling showdown, the problem will become worse, and the rational solutions will become more unthinkable. America was $10 trillion in debt when Barack Obama arrived in the White House. It’s blasting through the $14.3 trillion statutory debt ceiling now. At the current rate, it will be $17 or $18 trillion when he stands for re-election in 2012. Every single desperate demand for tax increases, and furious argument against real spending restraint, you are hearing today will be made with greater intensity next time… and the time after that… until the Empire of Debt falls, and takes you with it.