Could the US go bankrupt?

I heard recently that Iceland went bankrupt. Frankly, I didn’t think much about it. I don’t know of anything good or bad that comes from Iceland so I didn’t have much reason to care, I guess. I can never remember if Iceland is really the green one or if that’s really Greenland. So confusing. Anyway, I also saw an article on google news (that’s the newspaper of my generation—who needs newspapers anymore?) describing how the national debt clock near Times Square had to come down to add more digits. We’re over ten trillion now in case you hadn’t heard. That got me thinking.

I’ve heard comments about the national debt on the evening news since I was a little kid. Just like I remember the news showing crazy nut-jobs with full beards riding around in Toyota pickup trucks waiving AK 47’s all over Afghanistan during the 80’s. Does anyone else remember stuff like that? Anyway, back to the post…

So the national debt is different from the budget deficit. I guess you can have a balanced budget or a budget deficit for a particular period of time. But, the national debt continues to accumulate. Here’s an informative graph:



So what’s the big deal? We’ve had national debt as long as anyone reading this has been alive. Apparently it hasn’t been a “good time to pay for stuff now” (Lincoln H.) in quite some time.

Here’s how it would work if our household was the government. Emily and I decide we want to buy a gold plated toilet for our house. We kinda-sorta review our budget, but clearly we can’t afford it. Rather than choosing a nice “toilet-to-go” from Lowes, we decide to take out a loan for the shiny gold throne. We find a friendly person with lots of money to loan us the dough we need, and we get the new one delivered. We’re happy but we’re paying interest on the loan (debt held by the public.). It’s ok with our friend though, because he knows we have a steady income and we’ll make the payments. After a while, I decide I just can’t live without the aquarium wall I’ve always wanted. You know—those aquariums built into the wall of your house—man those are cool. It just doesn’t seem right that I shouldn’t get it—after all, I’ve always wanted one and that should be enough. We look at the budget again to see if there’s anything we could do to make it happen. I think about borrowing from Emily’s slush fund (intragovernmental debt, like taking from social security, etc) but there isn’t enough there to make it happen. We’ll use that on other stuff we shouldn’t. So, we throw an ad up on the web saying we need some money and we’re willing to pay 8% interest on it. We find a taker (probably from Japan or China—those are the two biggest lenders to the US) and make it happen.

After a while, we realize we should probably stop borrowing money since we’re in so much debt. We have a family council (session of congress) and we set a limit (law) on how high we’ll let the family debt continue to rise. We don’t do anything about the reckless spending though and it just continues. Rather than cutting spending or getting a higher paying job (raising taxes, kind of) we just borrow more money. We hold more family councils and decide the family debt needs to be addressed so we set a new limit on how high we’ll let it get. That pretty much means nothing by now, but we continue to do it. I do get some raises (higher GDP, higher taxes, etc.) in the mean time, but we all know no matter how much we make, we never have enough. The spending continues and pretty soon, we’re paying more on interest than anything else. Emily thinks we should stop spending so much and start paying the debt down, but I figure I’ll just get a better job (raise taxes) and continue borrowing. After all, there are so many things that have to be paid (mandatory expenses like Medicare, Medicaid, social security, etc.) and so many others that I want to buy (like social programs, funding for neat bridges, etc.). Before long, we’re just used to it and we only talk about it when we’re deciding who’s going to run the family councils or when we hit a neat bench mark like $10,000,000,000,000,00.

Ok, so that’s overly simplistic, but how far off the mark is it when we get right down to the bottom line? The only way to stop the nonsense is to curb the spending. The government borrows from its own citizens, internationals, other governments, etc. It even borrows from itself which we know destroys programs like social security. BTW, social security is not a tax. So many people think it's just another tax and don't understand why income over $112k(or whatever) isn't "taxed".

The spending has to stop. Eventually, we’ll be paying nothing but the interest and the lending will dry up. I don’t want to get “all conspiracy theorist” and all, but I could see this leading to trouble with certain other countries… My conclusion is this is a big problem and it’s not getting enough attention. President Bush royally failed us on this one. The gold toilet he’s sitting on sure chaps my hide. Hopefully he likes it.

(Note: this is a typical blog—probably full of errors and not very well researched)