Sunday, February 8, 2009

Getting a Constitutional Education – Government Debt (Part 3)

It’s important that we educate our children on the topics of politics, government, and the Constitution which governs our nation. This nine-part series attempts to remind us of some basic principles, lest they be forgotten by the next generation.

Imagine if you could simply go out and buy whatever you dream about having, right now, without worry about how you were going to pay for it. For me, that would be a mid-1960’s Chevrolet Corvette, preferably a 1963 or a 1967 with a few special features that I won’t burden you with here. I’ve always wanted one, and there are ways to have one in my garage right now. One of those ways is to simply tell the auto dealer that my kids will pay for it, plus whatever interest accrues between now and then. They can worry about how to pay for it – I want the car now! Most people would think such an approach to be irresponsible and selfish – and they would be right. But this story is an exact allegory to what happens when our government borrows money to pay for a program that they cannot afford today.

Article 6 of the US Constitution allowed the government to assume pre-existing debt before its ratification. One can infer that debt, while perhaps unwise, is certainly not prohibited by the Constitution. Debt is mentioned in one or two other places so, by implication, it would seem that government debt is allowed.

At one time, if the federal government wanted to enact a new program, they would pose the idea, discuss it, and if it passed the Congress in a vote, it would be financed by a new tax or a re-direction of existing money. But we live in a time when Congress behaves with far more impatience. Rather than wait to ensure that the money exists, Congress simply borrows the money, assumes a debt, and promises to repay it at a later date. As you might imagine, it is much easier to get funding by borrowing than it is to gain permission from the people through a new tax. Let’s face it, we don’t get an itemized tax bill from the government telling us exactly where our money is going. If we did, I have a feeling that we would be surprised…and not a little upset.

Government programs can grow unchecked because their cost is deferred to the future. Like the Corvette example, our politicians are comfortable allowing our children and grandchildren to pay for the things that they want to have now. The average individual does not “feel” this occurrence because their tax bill does not grow dramatically in the current year. But it should be understood that the government has already spent your tax money (and that of your children) for many years into the future, and they will continue to add to the amount between now and then. Simply put, an increasing national debt and a government which is unwilling to stop spending means that our future tax rates (and those of our children) must be driven higher than they are today.

Thomas Jefferson suggested a unique approach to this problem. Jefferson believed strongly that any new government debt should be paid off by current taxpayers, so as not to burden the next generation. He favored limiting any government debt terms to nineteen years – precisely to keep the repayment in the generation which enjoyed the benefits. What a brilliant idea! If only we had adhered to that concept after Jefferson proposed it!

To get an idea of the history of our national debt, consider these milestones:

· Late 1700’s – the national debt was $83 million, primarily due to funding of the Revolutionary War
· 1801 – Jefferson elected President, vowed to reduce the debt
· At the end of Jefferson’s terms, the debt was reduced to $57 million
· The War of 1812 – debt rose to $127 million
· Andrew Jackson campaigned on a platform of eliminating the debt, elected President in 1829
· Jackson paid off the national debt in 1835 – the government ran a surplus of $440,000 that year
· Small financial panics and wars drove the debt back up to $63 million by 1848
· Under President Abraham Lincoln, due to the financing of the Civil War, the debt rose to an astounding $2.8 billion
· Today, the national debt exceeds $10.6 trillion (visit the national debt clock to watch it grow)

Unlike private individuals who have an obligation to repay their debts, politicians have no personal responsibility to do so. They spend other people’s money and go into debt with the obligation resting on other people’s children. And not just politicians – those private individuals who today beg their congressmen to deliver a rescue plan at the detriment of future generations are just as complicit. We are quickly becoming a nation who would mortgage the future of our own children for the comfort and pleasure of whatever we can have today. Most people would say that a parent behaving this way is a poor provider. It is no different with the government. If you think that there are some special protections or safeties in allowing our nation’s leaders to follow this path, while knowing that any private individual would be headed for disaster under the same rules - think again.

Next article: What is the Sixteenth Amendment about? How did it forever change the issue of states’ rights? What would the founding fathers have thought? Back to the main index article.

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