President Barack Obama's deficit spending is disastrous. Consider the federal debt.
According to Romina Boccia of the Heritage Foundation, when Obama took office, the debt was roughly $10 trillion. It is now over $16 trillion. This is a mind-blowing increase of 60 percent in four years. Even if one blames the debt for his first year on George W. Bush, the increase on Obama's watch is still staggering.
Boccia points out that per U.S. taxpayer, the debt is now more than $111,000. In contrast, the average taxpayer makes $51,000 a year. It is true that all the recent presidents, including Bill Clinton, ran up the debt, but Obama's run has been on a whole different scale.
The total debt is now larger than the economy -Gross Domestic Product. In 2011, it was 102 percent of the GDP. The public debt - the percentage of the debt owed to parties other than the government - is now 71 percent of the economy and has increased by an astounding 80% since Obama took office.
This is unsurprising given that this disgraceful administration along with the unprincipled Congress ran $1 trillion deficits for four years in a row and paid for roughly 40 percent of each year's spending through borrowing. Other countries that have a higher total debt as compared to their economies than the U.S. are basket cases like Greece (165 percent) and Italy (120 percent), as well as Japan (204 percent), which suffers from long-term stagnation.
As the New York Times' Paul Krugman points out, just as redistribution of wealth simply transfers money from some people to others, government debt merely transfers money from some people to others. In this case, current Americans get stuff, future Americans pay for it.
The question is whether this debt is wrong. Consider a private business that allows its debt to climb to a dizzying level. Eventually, it will reach a point when creditors demand to be paid. Owners (for example, shareholders) then have two choices. First, they can avoid paying their debts by defaulting. This can be done by simply refusing to pay creditors. In law, this can be done (to some degree) through bankruptcy or by dissolving the business, assuming it is in certain legal categories. Second, they can spend much of their own wealth to pay off these bills.
By analogy, if current Americans run up a massive debt in their government, by voting for Obama and his spendthrift Democrat buddies, then future Americans will have to default or spend a great deal to draw down the debt.
Default is troubling if you think it is wrong to not pay your bills. We often think this. For example, we think it wrong when a house owner defaults on a sizable bill he owes to people who painted his house. Similarly, we think it wrong when a company defaults on a pension plan they promised their employees and that induced many to take or stay in their jobs. People often don't think this when a person defaults via bankruptcy, but it is unclear why this should make a difference. This is especially true given Americans don't like it when large businesses (for example, airlines) stiff people through strategic bankruptcy.
It is also troubling to ask future people to pay for current consumption. This is especially true if the future generations have to pay through the nose. Consider a scenario in which a father is allowed to gamble against his sons' future earnings. Were he to bet vast sums and lose, we would judge him harshly. Similar to the gambler, Obama and company's foolishly squandered the vast sums they borrowed. Much of it consisted of pumping money into unsustainable welfare and entitlement programs, floating state and local governments at unreasonable levels, and continuing our foolish wars.
Current Americans can, of course, avoid the debt altogether by dissolving this country and starting a new one. By analogy, shareholders can dissolve a corporation mired in debt. This will probably not fool creditors. In any case, this solution is unattractive to those who prefer the U.S. not be eliminated.
One objection to this is that the orgy of spending and debt was used to invest in public goods, such as the public schools, roads and other infrastructure, and the drug war. This objection fails to recognize that as a general matter, these things would have been well funded without the deficit spending. Did anyone think these programs were underfunded in first few five years of the millennium? Also, some of the institutions are broken or destructive and hence a bad investment. Consider big-city public schools and the prisons that warehouse large numbers of people for drugs.
A second objection is that we faced even higher debts following World War II and we grew out of it. Similarly, it is claimed, a growing economy will allow us to do the same in the future. However, following the war, our economy was nowhere near as socialized as it is now and U.S. companies were far more competitive relative to international competitors. Both helped fuel the economy. Also, following the war our political leaders allowed the deficit to drop like a stone and stabilized the public debt at roughly 44% of the economy. Our current leaders can't be trusted to do the same.
One result of this giant pile of debt is likely that some creditors will be stiffed. This will make it difficult for governments to borrow in the future. This is probably a good thing. Also, entitlement programs (Social Security, Medicare, and Medicaid) will have to be sharply cut back. This will likely occur by means-testing the first two and tightening up the means-testing for the third. Thus, the current spending orgy will result in many people not getting these benefits. This is unfair given that they spent a lifetime paying for these programs (for many, roughly 15 percent of their income), but voting for child-like demagogues, such as Obama, comes at a price.
Also, there will have to be big-time cuts to the American military and the closely related interventionist foreign policy. In the last two decades, the U.S. has gone to war against forces in Iraq, Afghanistan, Somalia, Serbia, Libya, Yemen, Pakistan, and so on and has continued to protect countries against China, North Korea, and Russia. Debtor nations can't afford these luxuries.
In summary, Obama and the Congressional big spenders ran up the debt to an unconscionable level. Future Americans will either have to stiff creditors or pay through the nose for this profligacy. Both choices are ugly. Also, entitlement programs will eventually have to be sharply cut back and our interventionist foreign policy pared down.
Stephen Kershnar is a Fredonia State philosophy professor. Send comments to firstname.lastname@example.org