Much noise surrounds an impending national debt default, which is being blamed preemptively in the press and among Democrats on Republican “intransigence” and “partisanship.” Of course, an actual default will never happen. We have seen this brinkmanship before, and the Republicans always do the “right thing” under the peculiar notions of right and wrong that prevail in Washington, D.C.
For D.C., the right thing is obviously mortgaging our future, avoiding a serious debate, and devaluing our currency to keep the party going a little longer.
These discussions are fundamentally dishonest—crude propaganda, at best. They omit that hitting the debt ceiling can be avoided with one simple trick: cutting government spending. I realize this is unfashionable, even among Republicans. The government spends with abandon and has for a long time, and most of us have become numb to the enormity of the problem. Just a few years ago the total debt was $20 trillion. After COVID and the first few years of the Biden Administration, it’s now $30 trillion. Thirty years ago, when I was in high school, it was $4 trillion, and we thought that was a lot.
Imagine if the government cut its spending to 1990s levels. The overwrought rhetoric about deep cuts makes one think we would be returning to Mad Max conditions. But, in spite of much lower government spending—about half of today’s in real terms—things were pretty good . There were fewer government workers, and almost everything was cheaper, but we somehow survived without Obamacare, Biden’s grotesquely mislabeled Inflation Reduction Act, and about $2 trillion in extra spending.
Fiat currencies are not worth much, and they’re worth even less if they’re constantly devalued, such that existing low-interest debt must be refinanced with higher-interest debt. This all means that we will soon be the improvident borrower, spending more and more on debt service, with less to spare for luxuries, necessities, and emergencies.
Considering the army of federal government workers and the expansiveness of their authority, most of us hardly notice the federal government. It does very little for the productive classes employed in the private sector. It is not responsive to the concerns of the public. There is some minor harassment, but this is mostly handled not by the government but by managerial class compliance personnel—i.e., human resources. As for the government itself, it is mostly just a parasitical thing that enriches the people involved in it.
For all the money the federal government spends—both borrowed and from taxes—it seems to have problems performing its core functions, like protecting our airspace from Chinese spy balloons or ensuring trains loaded with toxic chemicals don’t blow up small towns. When it does get involved, it’s doing bad things like mRNA vaccine mandates, hassling local police, or engaging in pointless foreign wars. One reason I and others in the productive classes are so sanguine about cutting government spending is that most of its functions could stop, and we would all be better off.
Obviously, a debt default would be bad. It would instantly ruin the dollar and cut the wealth of Americans who have managed to save a few bucks. It will make everything instantly more expensive, and life would become very difficult. Other countries have defaulted on their debt, including Russia in 1998 and Argentina in the early 2000s. Things were pretty grim in both places for a long time afterward.
But kvetching about Republicans and the debt ceiling is a false dilemma. They don’t really care. The old fiscal conservatives have not been prominent since at least the 1980s, because Republicans have made cutting taxes a central part of their brand since the Reagan years. For this reason, they have generally been indifferent about fiscal discipline and cutting deficits, arguing that economic growth will take of things.
This may be true, to a point. The economic growth of the 1980s allowed the debt to grow, but inflation remained low, and most people were better off. But, as a percentage of the economy, and in absolute terms, the total debt is now simply astronomical. Every American owes over $94,000. The deficit this year is going to be $1.4 trillion; interest alone will be about $500 billion.
Two-thirds of federal government debt have accrued since 2008. One would like to think there would be something to show for all this debt—a man on the moon or a Hoover Dam, maybe a cure for cancer. But instead, a bunch of dual-income GS-12 couples bought nice homes in Falls Church and Bethesda, favored constituencies like welfare queens and defense contractors received transfer payments, and connected businesses received enormous infusions of cash during COVID without regard for their need under the PPP and related programs. In other words, the rich and connected got richer, and everyone else, especially younger people, will get the bill.
The political system seems broken in fundamental ways: the media does little to keep it accountable, lobbyists foment rent-seeking behavior, and the items of bipartisan consensus—such as the war in Ukraine or the necessity of raising the debt ceiling—show a lack of long-term thinking or concern for the common good.
Nothing this stupid can go on forever. But whether it ends in some managed way, such as an effective austerity plan, or a catastrophic collapse, remains to be seen.
For now, the hysteria about the debt ceiling is fake, because the end result is practically preordained. Avoiding the real and rising burdens of government debt requires us to be mature, far-sighted, and concerned for future generations. For these same reasons, this issue will not be resolved, and this is the real disaster we should be concerned about.