We do the same things with our family budgets. Even very frugal people, whose Calvinistic parents taught them to save part of everything they earned, borrow to buy a house, or a car, or get an education. Sometimes we have to borrow to get enough to eat, or to keep the house warm in winter.
IBM borrows money; perhaps twice as much as it expects to earn in a year. But IBM knows that, in the longer run, borrowing is an astute thing to do. Financial institutions borrow about fifty times as much as they earn in a year. That might explain, a bit, the trouble they are in. Gambling with their investors money is a better explanation. Derivatives, anyone?
The United States government takes in about $14 trillion a year, and our debt is also about $14 trillion. That is a one-to-one ratio. It isn't ideal. We did much better under Bill Clinton, but it is understandable, given the stupidity of the Administration and Congress during the Bush years, which resulted in a terrible recession and banking crisis. We are digging our way out.
Congress does not just raise money, and spend money. It has to authorize itself to borrow the difference, when it needs to. That is called, "raising the debt limit". Congress just authorizes itself to borrow to make up for what it has already decided to do. If you get elected by chanting, "No new taxes!", and "Cut government spending!" (but know they cannot), the odds that you will find your financial arse in a sling are better than good: they are certain.
That is where we are. About the only things left to cut are Medicare and Medicaid, military spending, and Social Security.
Some members of Congress do propose to cut people off from medical care and social security, or to reduce it to howlingly awful levels. Those are the same people who get good government health insurance, and glorious congressional pensions. Most of the same people have no intention of cutting military spending. As Mort Sahl said of the war in Vietnam, "It is a dirty, rotten, little war, but it is the only war we have got, so we ought to be grateful."
And as for raising taxes, which are, in fact, at the lowest level they have been for 60 years, they insist taxes should be cut even more, although perhaps not on ordinary people (where everything can be shifted to sales and property taxes). They absolutely do not want to raise taxes on the filthy rich, who contribute to their election campaigns.
So here we are! We need to borrow about a year's income. Most of us who "own" homes have borrowed more than a year's income to do that. And for our cars. And tuition. And wedding rings.
Congress regularly raises the debt ceiling: that is to say, authorizes itself to borrow the difference between what it already has decided to raise in taxes, and what it has already decided to spend. In the last 50 years, Congress raised the debt ceiling about 75 times.
We have an uncomfortable, but manageable debt: about a year's income, in size. But Congress is demagogueing. Raising the debt ceiling is not a vote to raise taxes or to spend money. That has already been decided, by Congress itself. It is pretending, at best, or taking us for fools, at worst.
I fear it is the latter. They cannot believe we really want the nation to go into bankruptcy, can they?. We know BS when we hear it.
They are taking us for fools.
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