To put the size of the U.S. debt in perspective: It’s $14.3 trillion, as Dan Calabrese mentions. The entire U.S. economy, as measured in the last three months of last year, was $14.8 trillion.
In other words, for every dollar in the economy, the U.S. government owes someone another dollar. Add in $2.4 trillion (or more) debt owed by state and local governments, and you’ve got bankruptcy in all but name.
In February, the Washington Post, hardly a pillar of the Tea Party movement, said our fiscal troubles surpass those of 1946, when the country emerged from World War II: “The U.S. debt levels tumbled in the years after World War II, but today they are still climbing and even deep cuts in spending won’t completely change that for several years.”
Worse, the favorable conditions that helped us shrink government debt after the war (a youthful workforce, for one) aren’t around this time.
Now, I’m not a debt purist. Going into debt can be useful if the debt isn’t so large that you can make the payments. It’s also useful if you can, as a result of the debt, increase your earnings. So if, say, a business borrows money at 5 percent to buy new equipment by expanding its production capacity of a high-margin product but increases its profit by 10 percent, borrowing is a smart idea.
Government debt can also be useful, if used for the right things, such as a road that opens up a new growth area. But the problem is that much of our government spending is the equivalent of a man maxing out his credit card for first-run movies and buying dinners out with his mistress. In other words, a lot of in-the-now enjoyment that will bring headaches (fiscal and otherwise) soon enough.
First published by the Detroit News: http://apps.detnews.com/apps/blogs/watercooler/index.php?blogid=2093