Ok, ok. I know the “real” news stories today are Health Care Reform (HCR) and Limbaugh’s quest to buy an NFL team, but let us not lose focus of the overwhelming thing which affects everything from your energy bill, to the greater US economy, to international affairs alike… Debt.
You sure know that in fiscal year ’09, which ended late September, the federal government ran up a $1.4 trillion deficit, triple the amount of fiscal year ’08, a deficit that the Democrats last year (already controlling 2/3 of the budget process since wining control of Capital Hill in late ’06), decried as unsustainable, and Candidate Obama, alone a member of the deficit-enlargement Congress, led attacks against it on the campaign trail.
At any rate, as a way to scare the nation and the Congress to control spending, deficit critics warn about the debt that will “be left for our grandchildren.” The problem is that such a warning permits people to say: “our economy is in trouble now, so let’s spend our way out of it, we will worry about the deficit another time.” This of course is nonsense because the debt of now creates messes now (let alone for the future too).
Here is one example: Due to a loss of confidence in the dollar as results of deficits, the dollar falls, oil prices – which of course trade in dollars –go up because oil-producing nations need to compensate the loss of the dollar value. As a result, gas and energy prices on the retail level go up, and therefore less people have money to spend on other stuff, like shopping, paying mortgage bills, etc. This pulls back the economy with all perils that follow, as it happened in late 2007 and got worse the following year largely in result of the unsustainable gas prices.
Here is another example: in order to make their bonds more attractive to a skeptical market, the U.S. government needs to pay a bigger interest. When Uncle Sam pays more on a loan, homebuyers, colleges students, new business owners and everyone who wants to borrow a buck, pays even more interest, and when interest rates go up, spending goes down. When spending goes down in an already weak economy, no real recovery can take place. As a result, more people are out of work; more consumer default on credit payments, etc, etc, etc, and there goes your economy to hell in a hand basket.
In total: all the talk of indebting our children, permits people to believe that the deficit danger is one that can be pushed off for the future, when in fact it kills you and your neighbor every day, let alone your grandchildren too.
