A nice person asked me other day: “What are the tangible consequences of having too much national debt on the average person today?”
“Not much….today”, I replied. “But building up excessive national federal debt loads is like sitting in a car too long with the engine running in a closed garage….the carbon monoxide will slowly put you to sleep and then you will die.”
That might sound a bit extreme and alarmist, but hear me out on this one.
Here is the Wikipedia definition of carbon monoxide: ‘Carbon monoxide is colorless and odorless, but very toxic. Carbon monoxide combines with hemoglobin in the blood converting it to carboxy-hemoglobin which is ineffective for delivering oxygen, a condition known as anoxemia.’
If your blood can’t deliver oxygen to your body, you can’t process anything in your body to stay alive. It is just a law of chemistry and biological processes in the human body.
How is too much debt like carbon monoxide? Just look at the wreckage we have just witnessed on a colossal scale on Wall Street, in Detroit, at AIG. What was the one common denominator? Excessive loads of debt compounded by reckless risk-taking without adequate reserves, due diligence or collateral to back those investments.
Excessive federal debt doesn’t immediately ‘hurt’ living voters like paying taxes does or having your favorite federal spending program reduced. But federal debt insidiously pervades through the economy much like the carbon monoxide molecule invades the human body; at some tipping point in time, it becomes near impossible to pay the interest costs of the debt and currencies are inflated to try to pay off all of the old mountain of debt.
We are paying over $500 billion in gross interest costs in this year alone!  That is way bigger than any tax cut we have ever even wildly dreamed off in the good old ’supply-side’ economics days. What sort of new, exciting technologies could we invest in if the private sector had their hands on 500 billion more dollars every year?
What makes anyone think the U.S. federal government is immune somehow to the immutable laws of finance or economics? Just because we say so?
What happened to the German Republic after WWI? They were hamstrung by excessive terms under the Treaty of Versailles but the ultimate destruction was caused by the hyperinflation that occurred when all that money was printed to help pay off the excessive debt and reparations they incurred. Does ‘printing too much’ money sound too much like “expanding the Federal Reserve balance sheet’ to you today? It should.
One of the most inane things I heard repeatedly in testimony after testimony in Washington was the following statement: “The level of national debt does not matter because ‘we owe it to ourselves.’”
Really? Is that a true statement? The Chinese government, which now holds close to $1 trillion of our American debt, and are questioning whether to buy more, might disagree with that notion.
Do you own any debt that you have extended to the federal government in terms of bonds? Do you feel like ‘you owe that to yourself”? I seriously doubt it.
I would postulate that the more exact wording of that old bromide should be: “The level of national debt does not matter (to us) because our children will be forced to pay for everything we consumed after we are dead and gone”. They are not going to be very happy about paying for it, I can promise you that.
And that is the second reason why excessive debt loads today are dangerous. Do we really want to see what happens if those future generations decide that the Americans who managed the nation (as voters or officials) from 1980-2009 were the most selfish, self-consumed, least self-sacrificing generation in history?
They might suffer lower standards of living than we want them to...after all, they are our kids and our ‘legacies’.
Or they might deface all of our tombstones…and you don’t want that to happen either, now do you?
 see http://www.telemachusleaps.com/2009/03/ultimate-waste-in-federal-spending.html