Monday, August 9, 2010

We, the People, deserve better!

As more Americans discuss the economic State of the Union, I've heard a lot more people offer comments like "G.W.B. put our Country in a huge amount of debt to one nation we should never be in debt to...China." 

After studying the National Debt quite in-depthly for the past six years, it's time to take a look at not only the accuracy of statements like this, but what "We, the People" as a whole fail to understand about the National Debt.

The people who put our country in a huge amount of debt is Congress. The National Debt was established in 1791 as a way of paying off all of our war debt from the Revolutionary War (side note: Since some states had already paid off their share of the debt, and others hadn't, there was a lot of bargaining going back and forth between Alexander Hamilton and the representatives of Pennsylvania and Virginia, primarily. In exchange for these hold out states financially uniting with their geographical brethren, the U.S. Capitol was moved from New York to Philadelphia temporarily until a new national capitol was built from land previously owned by Virginia and Maryland on the banks of the Potomac river. Washington D.C. would never been established where it is except for the war debt agreement, but I digress.)

The national debt rose and fell from 1791 to 1959. It was nearly paid off in two consecutive years - 1835 and 1836 - before the Specie Circular was released by Andrew Jackson, demanding all land grant payments to be made in gold or silver only - no greenbacks. In fact, in 1830 Jackson vetoed the "Mayville Road" project in Kentucky because it would have required federal funds going into a road - something that was unheard of at that time. Our country was on the course to eliminate the debt and our leadership wanted to accomplish that goal. (For more on the "Mayville Road" click here)
The last year that the debt was paid down was 1959, when President Dwight Eisenhower was still President. It has risen every year since then - at astronomical proportions. Even during the Clinton years the debt still grew, despite the rhetoric out of ill-informed Democrats who insist that the debt went down during the Clinton era. It grew by a "paltry" (and I use that term lightly) $17 billion in 1999 - it's smallest growth since 1959.

The reason behind this is compound interest and the refunding of the debt. Neither party takes this problem seriously.

We don't understand the fact that when you print money, every time a bond is issued on the market, the value of the dollar goes down in relation to other currencies. We don't understand that when bills, bonds and notes mature, new bills, bonds and notes are taken out to pay the principle and interest on the old ones. We don't understand the fact that in the month of June 2010 alone (per, we taxpayers paid over $106 billion in interest payments. In the entire fiscal year to-date (Oct. 1, 2009 - July 31, 2010) we paid over $375 billion in interest payments with two months left to go. The entire debt in 1969 was $368 billion.

If we, the people, would actually get serious about shedding debt and making government live within its means, then the "deficits" would be eliminated almost immediately. One could argue about earmarks, percentage of debt to GDP, money accounted for in the "out" years, lack of double entry bookkeeping and GAAP standards - but the truth is - WE, the PEOPLE, don't understand the debt. (I've studied it in-depthly for the last six years)

Since President Obama was inaugurated, the national debt has increased over $3 TRILLION. This is a combination of excess government spending, not enough income plus the interest payments that are off-budget. This is the same amount of increase in 18 months that it increased in the entire 8 years of GWB.

The problem, again, is not Republican or Democrat. It's an AMERICAN problem. Neither party wants to admit their fault. Both parties want to blame the other guy. Personally, I blame Congress because they are the ones that are constitutionally mandated to have the power of the purse. All revenue bills originate in the U.S. House of Representatives. And, my friend, they have all let us down.

We, the People of the United States of America (including those living abroad) deserve better!

- Jeffrey S. Williams
  Founder, National Debtbusters

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