The $18 trillion national debt is commonly used as a sign of the sad state of the American economy.
However, America is not alone in its debt woes. If misery loves company, then America has plenty, with most major countries ringing up similar arrears.
The world debt figure has now reached an alarming $100 trillion with no end in sight. Worse yet, a third of this debt dates from mid-2007. Debt obligations are getting exponentially higher, involving unimaginable amounts of money.
Photo Credit: AFP PHOTO/BRENDAN SMIALOWSKI
The recent surge in public debt is largely a result of misguided economic policy. Government leaders thought they could spend their way out of the 2008 sub-prime mortgage crisis by introducing massive stimulus packages. According to the Bank for International Settlements, governments worldwide added $30 trillion in debt to their balance sheets – nearly twice the size of the entire United States economy.
The logic behind the spending came from notions propagated by economist John Maynard Keynes (1883-1946), who argued that in times of economic crisis, governments should go deeper into debt so that they could spend more money. He claimed such deficit spending would in turn jump-start stagnant economies. Today’s liberal economists were only too happy to point out that near record low interest rates only make the opportunity to spend a real bargain.
However, once again, this policy has not worked. For all the spending, economic growth is sporadic and anemic at best. Unemployment rates remain high. Increased government spending has sucked capital out of the productive private sector and put it in the hands of the generally more unproductive public sector.
The predictable result: Increased government deficit spending only serves to increase deficits.
Indeed, the numbers are not pretty. Worldwide government debt is growing faster than the global economy. Since 2008, global GDP (gross domestic product) has increased some $13 trillion. Such an increase is not much to show for the $30 trillion debt investment. Even worse, in all probability the increase is more likely due to private sector initiatives than the aftereffects of pork-laden stimulus packages. It seems trickle-up government bond offerings do not trickle down well to the economy at large.
This undated photo provided by the Colorado Department of Transportation shows a Denver-area sign. Colorado highway authorities say they'll continue requiring highway bids using federal stimulus money to include these signs. That's despite complaints from Republicans that the "Putting America To Work" signs are simply promotions for the spending plan. (AP Photo/Courtesy of the Colorado Department of Transportation)
The tragedy of it all is not just the amount of debt but the coming day of reckoning. One can only kick the can down the road so far before the can falls apart. When spending with abandon, it is easy to forget that this debt must be repaid with interest. Governments, which treat their budgets like credit cards, are soon reduced to servicing only the monthly payments. A day will come when the spending limit will no longer be extended. Buyers of debt will flee from the bond markets in search of safer investments.
While such governmental debt policy is definitely bad economics, it also represents a moral problem deep inside the soul of modern man - the frenetic intemperance of a culture lacking restraint and centered on instant gratification where money rules. Governments today are merely reflecting the impulses of modern society where all must be obtained instantly and without consequences.
[sharequote align="center"]Governments are reflecting a culture lacking restraint and centered on instant gratification[/sharequote]
Governments ringing up record amounts of debt have their consumer counterparts maxing out their credit cards. American personal debt, for example, has inched its way back up to the $13 trillion level achieved in 2007. In another case of misery loves company, American consumers are not alone in suffering from the hangovers caused by their binge spending. Consumers everywhere seem to be on board.
There must be a return to order when the party stops. As debts mount, the big question is: When will the multi-trillion-dollar debt parties stop and what will happen afterwards?
John Horvat II is a scholar, researcher, educator, international speaker, and author. Recently his book Return to Order ranked first on Amazon in four countries.Mr. Horvat lives in Spring Grove, Pennsylvania where he heads the Tradition, Family, and Property Commission on American Studies. You can reach Mr. Horvat directly at this address: jh1908@aol.com
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