THE ECONOMY:

Instead of Raising the Federal Debt Ceiling, the Public Should be Raising the Roof

by Fred Cederholm

Given the yearly escalation of this profligate fiscal/ financial mismanagement, just how much time will this new $800 billion increase buy--or rather finance--for us?
With the stroke of a pen that occurred at the White House on Nov. 19, 2004, President Bush signed the bill raising the US National Debt ceiling by yet another $800 billion. This was done without any fanfare. It was not treated by the administration as a photo op. I never saw any pictures of smiling faces looking upon the signing in the warm fuzzy spirit of partisanship/bi-partisanship-- did you?

This bill should have been signed in a dark closet with Karl Rove holding a flashlight while "W" signed it--using the back of Chairman Greenspan as a desk. You see, this whole deplorable scenario was carried out in the shadows, from start to finish. This administration knew in Spring 2004 that an increase was necessary--just look to comments from Treasury Secretary Snow over the summer. The May 2004 House Bill proposing a ceiling hike of $690 billion was not ratified by the Senate until Nov. 18, 2004: then BOOM, it became this $800 billion jump.

Politics are what they are--re-election being first and foremost--the voters must not be distracted from the real issues of abortion, gun control, stem cell research, gay marriage, and terrorism by the mundane matters of deficits, debt, education, healthcare, Social Security, and job loss. There would be no raising the debt ceiling before the elections. No Congress/ Presidential Administration ever likes to approve increasing the debt ceiling because it puts the spotlight on their profligate spending and lack of fiscal control. (For more on that topic, see "Will US Senate Dare to Raise the Debt Ceiling Before the Election?").

Future liabilities don’t show up in the yearly deficit number, but they do in our cumulative debt. As of Sept 30, 2004, these comprised $ 3.071 trillion of the $ 7.379 trillion ($7,379,000,000,000) total outstanding Federal Debt.

Historically it took this nation from 1789 to FY 1979 to accumulate the first $800 billion of debt. The second $800 billion was added by FY 1984, the third by FY 1988, the fourth by FY 1991, the fifth by FY1992, the sixth by FY 1995, the seventh by FY 1999, and the eighth AND ninth by FY 2004. World War I increased the Debt by $25 billion, the Great Depression increased the Debt by $33 billion, and World War II increased the Debt by $222 billion. (See http://www.publicdebt.treas.gov/opd/opdpenny.htm or http://www.publicdebt.treas.gov/opd/opd.htm#history ) The National Debt has not gone down from one year to the next since the last year of the Eisenhower administration. Now, there was a fiscally responsible Republican President who warned us of the dangers of a military/industrial complex and the costs of permanent warfare. (See "Military-industrial complex speech").

Our elected officials would argue how the prior summary is unfair--since the US Dollar has lost some 90% of its purchasing power since 1910. (And, whose fault is that?) Given the yearly escalation of this profligate fiscal/financial mismanagement, just how much time will this new $800 billion increase buy--or rather finance--for us? Ironically, the point is moot, given that Congress approved a bloated spending bill of $360+ billion within days of raising the debt-ceiling cap. (WOW, just got 8 million more virgin platinum cards--each with $100,000 lines of credit--let’s shop!)

How much is $7,379,000,000,000? It's $36,895 for each of 200,000,000 people.

Have you ever noticed, or questioned, how the annual increases to the National Debt are much larger than so-called underlying annual budget deficits? You see, the true budget deficit is reduced by annual surpluses of (off-budget) trust funds administered by Uncle $ugar. Social Security/Medicare are the largest, but there are others. When their annual prepaid sums are lumped with general revenues and spent elsewhere, their future liabilities don’t show up in the yearly deficit number, but they do in our cumulative debt. As of Sept 30, 2004, these comprised $ 3.071 trillion of the $ 7.379 trillion total outstanding Debt. (See "The Debt to the Penny and Who Holds It") There will be a day of reckoning forced upon US/us--if not by our own citizens, then by our foreign $ugar daddies.

Veep Cheney once stated: "Reagan showed us that the deficits don’t matter." The debt/deficits do matter: if not to the non-savvy American public, they matter to the foreign governments/corporations/central banks who hold half of our outstanding Debt, and/or are sitting on trillions of our outstanding Federal Reserve Notes as reserve currencies--not all are part of the Debt. Just look to recent declines of the US Dollar relative to the other world currencies.

When you are up to you’re A$$ets in alligators is not the time to realize that your first objective should have been to drain the swamp. This is particularly true when the angry gators are frustrated global species--speaking Chinese, Japanese, Korean, Arabic, Russian, French, German, and Spanish.


Copyright 2004 by Fred Cederholm. All rights reserved. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer who contributes the column "TH*NK*NG" to The Weekly Observer in Creston, (Ogle County) Illinois. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at asklet@rochelle.net.



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This story was published on December 17, 2004.