Government Debt: A Blessing or a Curse?

| April 2, 2013 | 0 Comments

As I’m sure you’ve already heard, unless you live under a rock, the United States owes a lot of money. According to the US National Debt Clock, at this exact second, the total debt is:

Sixteen-trillion-seven-hundred-and-forty-nine-billion- seven- hundred-and-sixty-four-million-eight-hundred-and-thirty-three-thousand-nine-hundred-and-eighty-nine dollars and an unspecified number of cents.

A minute from now it could be a few hundred thousand more. This massive number comes out to $53,072 in debt owed by every man, woman and child in the United States. And the debt is increasing rapidly. Every day, it grows by 4.5 billion dollars. As a college student, still wrapped in the cocoon of college life, the idea of entering the real world with student loans, no money and a looming national debt to slowly pay off sounds like a monumental burden. Honestly, it makes me want to crawl into my bed and sleep until the nightmare goes away.

The debt clock 30 minutes after writing this post, the number? Up by:

The debt clock 30 minutes after writing this post, the number? Up by: ~ 1/2 million

Yet national debt hasn’t always been a curse.

First of all, national debt is a relatively new concept. Alexander Hamilton, the first treasurer of the United States, came up with the radical new idea in the 1790’s.  As the first treasurer of the newborn, post-Revolutionary-War United States, Hamilton knew he had to come up with a way to pay off the $50 million the US owed in war bonds. If he couldn’t come up with a viable solution, the union threatened to break apart.

Alexander Hamilton: The completely self educated orphan from the West Indies who became a general under George Washington and then the face on the $10 Bill.

Alexander Hamilton: The completely self educated orphan from the West Indies who became a general under George Washington and then the face on the $10 Bill.

His solution: national debt. The plan took all the different war debts and consolidated them into one giant federal debt. If the nation could pay off this new, combined debt, then it would receive a good credit rating in the eyes of the world, which would enable future borrowing from foreign investors. With this new system in place, US citizens were given new, federal bonds which were due in 30-years at only 6% interest. Basically, this meant that citizens didn’t have to deal with the debt immediately, but could instead pay off the Union’s war debt slowly in thirty years with a relatively low interest rate.

Hamilton’s idea came in handy in 1803 when Thomas Jefferson paid for the Louisiana Purchase (basically the entirety of the mid-west) by convincing Napoleon to take the 6% bonds, which came due in fifteen years.  Napoleon, eager to conquer Europe, took the bonds and sold them to the English for immediate cash. Ironic right? The English bought the US bonds that funded the Revolutionary war.

Irony aside, by 1835 the United States had managed to pay off the original $50 million, marking the only time in US History that the government has been debt free. Whoo-hoo! Too bad it didn’t last long.

Now, 178 years later, the US is crippled by debt. It doesn’t help that our government is spending huge sums of money every day on the military, Social Security and Medicare. Only 2.2% of government spending goes to K-12th and college education, 0.3% to general science and research and 0.1% to agricultural research.

147.3 million ounces of gold are currently being held in Fort Knox.

147.3 million ounces of gold are currently being held in Fort Knox.

But wait, before you get angry with me or start nodding your head in righteous agreement, read all that I have to say. On the surface level, the simple answer would be to simply halt the majority of intra-governmental spending, which currently holds $4.8 trillion of the US government’s debt. With a simple pen stroke, the debt could be reduced by a ¼! Too bad, it’s nowhere near that simple. Medicare and Social Security may be expensive, but they are wonderful programs and their elimination would hurt millions of people. Think of all the elderly who would stop getting healthcare. Think about the fact that when you are older that aid won’t be there for you. If you don’t have enough to pay for a hip replacement or an essential heart operation out of pocket, you simply won’t be able to get one. The quality of life in this country would plummet dramatically.

Alaska For Sale! Never mind that it's in the middle of nowhere and relatively uninhabitable.

Alaska For Sale! Never mind that it’s in the middle of nowhere and relatively uninhabitable.

So what then? What happens when our foreign investors realize that we may not be able to pay off our debt to them after all? Sell off all the government land? Over two-thirds of it is in Alaska and covered in permafrost, making it somewhat less appetizing to those seeking land in the United States. Sell all of our gold? Selling all the gold in Fort Knox would only reduce the debt by $221 billion, which at our current spending rate would only hold up the government for two months. Increase taxes? Don’t hate me for saying this – and for someone who makes very little already, I sort of hate myself for thinking it – but yeah, raising taxes would probably help. It’s really the only efficient long-term way of paying off debt, since borrowing only leads to more debt, printing money will cause hyper-inflation, and selling natural resources to any great extent would mean raping and pillaging the environment.  Also, spending less on the military would probably be a great idea too. Spending 20% of the government’s budget on the military seems rather excessive to me but, then again, I’m open to debate. Give me a logical reason, and we can talk about it.

Back in the day, when Hamilton proposed the idea of national debt, it felt like a real blessing. It eased a great burden placed on a newly formed country, allowing the United States to establish a new government and gain a foothold in the world economy. But it was a concept with a catch. National debt is great, as long as it can be paid back.

I don’t know what the answers are. I don’t know how to solve the debt crisis. But the first step is to get people talking about it in a rational way instead of just yelling at each other across the aisle. There are many wonderful minds in this country. If we can spark a thoughtful debate on the matter and deal with the facts, we can solve this together.

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Category: Campus Culture, featured, Politics

Emily Sheehan

About the Author ()

Emily Sheehan is from the rainy city of Seattle, Washington. She loves lattes and latte foam, the quiet of snowfall, fantasy novels, black cats, and The Lord of the Rings movies. She aspires to become an executive producer or director and make movies that tell fantastic stories. If she can make at least one person laugh once a day for the rest of her life she'll be satisfied.

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