It’s a pretty good rule of thumb that, in Washington, whatever the Establishment is focusing on is a distraction from the real issue.
Over the next few months, Washington will be all bent out of shape about raising the debt limit. Let’s be clear, the big danger to our nation is not whether we raise the debt limit this year. It is whether we listen to this alarm bell and get our nation back on track.
If Democrats in Washington had their way, we would raise the debt limit and continue the status quo – no transformational changes, just whistling past America’s graveyard.
The debt limit is the federal government’s legal authority to borrow. It currently stands at $14.3 trillion dollars. If we raise it by another trillion dollars, we will be in the exact same situation we are today in less than a year.
If, as many political consultants argue, we raise it by more than $2 trillion, we would get past the 2012 elections. None of this matters. If we raised the debt limit by $10 trillion, we would still eventually find ourselves in the same situation we are today.
The crisis in America is not about our debt limit. It is about our out-of-control spending. It is about a bleak fiscal future and a nation on the decline if we do not take bold action soon.
Senator Chuck Schumer (D-NY) is one establishment politician who is focused on political messaging, as opposed to confronting the real issue. He should know better, though. Senator Schumer, who represents Wall Street and received 15 percent of all 2009 Senate contributions made by the financial services sector, knows that America is on a path towards fiscal calamity.
Yet, Senator Schumer claims conservative attempts to confront the oncoming crisis by coupling much needed fiscal reforms with any increase in the debt limit is “playing with fire.” He says we risk “a recession or worse” if we don’t pay our debts.
His premise is flawed and disingenuous, though, because nobody is suggesting America not pay its debts. More to the point, that will not happen even if we reach our debt limit, which would merely prevent the United States government from borrowing any more money until the limit is raised. According to President Obama’s budget, the United States government will pay $208 billion in interest payments on our debt this year. Revenue, however, is far more than that figure: $2.2 trillion. That’s more than 10 times more revenue than interest payments.
Senator Schumer is intentionally using scare tactics to divert attention from a far more important conversation: America’s pattern of reckless spending.
American families understand this concept. If you take out a second mortgage, max out your credit cards, and spend your parent’s retirement and your children’s college money, taking out another loan does not make a lot of sense. In fact, most banks probably would not give you another loan because you obviously don’t have a credible strategy to pay off your previous debt.
Amazingly, the federal government is proposing to do just that. After racking up $14 trillion in debt, jeopardizing the social safety net and our children’s future, they’re going back for more. Alarmingly, the International Monetary Fund pointed out that America lacks “credible strategy” to deal with our debt.
Our nation is not spending prudently; this year we are running a $1.6 trillion budget deficit. We haven’t demonstrated any fiscal responsibility; the U.S. public debt is 97% of our nation’s entire economic output.
Financial analyst Mary Meeker has created a series of financial statements for the United States government as if it were a corporation. She found our national debt to be more than three times greater than our government’s assets.
That’s alarmingly high, especially compared to some real companies.
Morningstar gives Microsoft a AAA credit rating. Its debt is about one-tenth of its total assets. UPS has a A+ rating. Its debt is about one-third of its assets. Ford Motor Company has a less than stellar BBB- rating. Its debt is only about five-eighths of its assets. Our government’s debt-to-asset ratio is five times higher than Ford Motor Company. That is not good!
So let’s be very clear: conservatives are not playing with fire. The fire is already raging and threatening to burn down the house. The alarm bells are going off with increasing frequency. The only question is whether anybody in Washington will listen.
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