The United States is Rolling in the Debt

“California’s financial woes are over!” one blogger announced triumphantly on his WordPress.

“Read my lips: eight, five, one in a single year,” wrote another, comparing that number to the most recent estimate of California’s debt: 450. “We’ve fixed it!” the post went on to claim.

I hate to put a damper on the festivities, but these posts illustrate more than just American optimism. They illustrate a very American willingness to ignore decimal places. The California debt currently stands at $450 billion. Though they may sound similar, there are 1000 millions in a billion (and 1000 billions in a trillion, but we’ll get to that later). Thus, the government owes its taxpayers and its bondholders (who are typically foreign) $450,000 million. Just 0.19 percent of that will be recuperated this year, meaning that at this rate, it would take the state of California over 500 years to repay its debt in full.

This is but the smallest of victories.

Eight months ago, in the middle of the 2012 fiscal year, the U.S. Department of the Treasury quietly released a statistic saying that the country as a whole is $15.8 trillion in debt. The statistic went largely unnoticed, however, overshadowed as it was by the other number released by the Treasury that month: a monthly budget surplus of $59.1 billion. Once again, although $59.1 billion may sound like a huge amount, a trillion is a whole lot more than a billion. The May surplus covers just 0.1% of the Federal debt. The math is simple. But at a time when the country is desperate for a bit of good news, it’s all too tempting to set aside the sobriety of long division for hype.  

   Of the past 70 fiscal years, which together constitute the “modern period” of American economics, only 12 have seen budget surpluses. The remaining 58 have been spent in deficit. Moreover, even after these annual deficits are adjusted for inflation, they have been growing rapidly, especially in recent years. And every partisan will offer you his own reason to explain this — too much healthcare, too much defense spending, too many benefits for government employees. Nearly all the pundits agree that a significant part of the problem is corruption. In addition, earmarks and pork barrel spending have quadrupled in the last decade, according to the nonpartisan watchdog group, Taxpayers for Common Sense.

But no explanation on its own is enough to account for the unique culture of debt that has developed in the United States.

It doesn’t have to be this way, however. Our debt-to-surplus ratios are matched only by developing nations in Asia, Africa, and South America. Most European countries — despite having borne the brunt of World War II — have managed to post positive debt-to-surplus ratios over the same 70-year period. Their solution? Aggressive taxation, minimal region-specific spending and small militaries relative to population size. In the middle of their 2012 fiscal year, the French government passed a bill that increased income tax to over 70 percent.

Now, the United States is different. It doesn’t necessarily have to take the European path to financial solvency. But more and more, partisans on both sides seem to agree that U.S. governments — state and federal alike — need to be more aggressive in tackling their debts. An $851 million budget surplus is a very modest start: It’ll be interesting to see where our state goes from here. It’s easy to be frustrated with financial problems for their seeming intractability, but it might be easier if we were more willing to do the math.

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