Spending like there's no tomorrow
It's time for Uncle Sam to call a credit counselor.
April is the cruelest month, T.S. Eliot famously wrote. I'm guessing Eliot penned that line just after Turbo-taxing his 1921 returns over to the IRS. As we endure what for most of us is a forlorn exercise in fiscal cartography this month, there is another budget we should also prepare to make a good account of--our nation's. This year Americans will cough up almost $2.8 trillion dollars in tax revenue to the federal government, and that spit-take inspiring figure will still not be enough to cover our government's daily debts.
Here's our fiscal wasteland: We are a culture and a government living on credit, spendthrifting away our grandchildren's future. The national debt now exceeds $8.2 trillion; annual deficits loom between $200 and $500 billion into the foreseeable future; personal debt likewise can be measured in hundreds of billions annually; and the current account deficit--the difference between what the United States imports and what it exports--now approaches $70 billion a month. America is adrift in an economic perfect storm of its own brewing.
Our house-of-cards-style financing wouldn't be so bad if it were at least producing investments in the nation's human capital--better education or universal health care--or improvements in its infrastructure or industrial capacity and competitiveness. But our deficits are funding a war without end, an insatiable Pentagon procurement schedule, and a relentless march of tax cuts for people who for the most part are already affluent.
Asian banks have been shoring up the U.S. economy for years, buying billions of federal debt in Treasury notes and personal debt in mortgage bonds. They are not likely to continue that policy indefinitely. Already China has announced plans to diversify its foreign currency reserves in what could be the first step away from the not-so-almighty, overvalued dollar. A dollar falling over the edge would almost certainly trigger a domestic economic collapse that would quickly escape America's borders. The world's poor, as they have in every other major economic disruption in the past, would certainly endure the worst of the suffering that would result.
Our collective inability as a nation and as consumers to balance our budgets is not just a political, but a moral failure. In fact, reining in U.S. debt could be the most challenging social and moral problem of our times. Though terrorism and Mother Nature remain potent and uncertain dangers, it is America's fiscal gluttony and shaky monetary policy that are emerging as the likeliest threats to world stability and peace.
While you couldn't run a neighborhood deli the way we Americans pay--or, more to the point, don't pay--for our government, few of us ever consider the long-term moral hazards hidden in such short-term fiscal. Already the Bush administration relies on reductions in social services in its half-hearted attempts toward a balanced budget. Following that model, ever larger deficits will mean an even greater burden on the poorest and most politically vulnerable. And if our debt is not restrained, future administrations may be tempted to engage in some monetary monkey business that will mean a catastrophic devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. of the dollar--along with the retirement dreams of millions of middle-class Americans.
But even that unpleasant possibility is not the worst of all doomsday scenarios spinning out of our debt addiction. There can be little more dangerous than a one-time superpower lurching through an economic crisis with only its massive military might to deploy as a negotiating device among clamoring overseas creditors.
Setting our fiscal house in order will require cool heads and a willingness to accept a shared and equitable sacrifice from all citizens, not just those with the weakest political voices. Stewards of a great wealth and power, we are also stewards--it is not mere imperial arrogance to think so--of the global future. We are already squandering the future of our own children and grandchildren, but continuing to spend far in excess of our means and our needs endangers that of our brothers and sisters all over the world.
Surveying his Wasteland, Eliot implored, "Hurry up please, it's time." Not bad advice this year for American taxpayers as they turn from making a good fiscal account of themselves to demanding one from their government.
This article appeared in the April 2006 issue of U.S. Catholic.