You load sixteen tons, what do you get? Another day older and deeper in debt Saint Peter don’t you call me ’cause I can’t go I owe my soul to the company store
–“Sixteen Tons,” Merle Travis
So you support the impending war against Iraq, eh? Ok. That will be $2,500, please. Don’t worry about sending a check just yet. We will payroll deduct.
Oh, and that’s just for this year. Then we have to rebuild Iraq, of course. Though we will need another $15,000 from you for that effort, the good news is that it will be spread out over the next decade or so. For now, we’ll just add it to your share of the national debt, which is – let’s see now – about $387,500 as of today.
And then there will be interest on the debt, of course. That totals $19,375 per year on your share of the current balance, assuming 5% interest. As usual, we won’t be bothering you to pay off any of the principal for the foreseeable future. What? You don’t have it? You didn’t budget for it? Don’t worry. After all, we don’t. In the immortal words of Joe Black, these things have a way of working themselves out.
The US population totals 290 million. Though there are 98 million taxpayers, there are 80 million households. Each household consists of 3.63 people. The figures quoted above are per household, a more realistic way of looking at things, I think, since my thirteen-year-old girl simply doesn’t generate much in the way of tax revenue.
Simply saying the war on Iraq will cost $200 billion has no impact on any but the most inveterate policy wonk. It’s really tough to relate to a billion, you see.
When I was a kid, pennies counted. Nickels and dimes were money. Dollars were the province of grownups. Of course, then you could send a letter for 3 cents and get a double-scoop ice cream cone for a dime (real scoops, too, not the puny things peddled for a buck apiece today). New cars cost $400…tax included.
The only reason we had a concept about millions back then was due to John Beresford Tipton, whose minion each week delivered that sum, tax free, to some poor schmuck whose life subsequently became wrecked by an endless stream of mansions, yachts, servants and hangers-on. That was Fifties TV’s “The Millionaire.”
Billion became a concept during the Sixties, thanks to Viet Nam. Of course, most of us know that the world population has doubled recently, to about 6 billion people, most of whose little fingers are hard at work right now, churning out snorkels and snowsuits for Wal-Mart.
I honestly don’t recall when trillion came into usage. Sometime in the Seventies, I think. It’s in full vogue now, however. US gross domestic product (GDP) totals $10 trillion, fully a third of the entire world’s GDP (though we number only 5% of the world population). The stock market declined $7 trillion over the past two years (your household’s share was $87,500, by the way). It will cost $1.2 trillion to rebuild Iraq, just about half the US national budget each year.
What’s the next level? Had to stop and think, didn’t you? I suppose it is quadrillion, but I’m not certain about that.
I still have trouble with millions, to tell the truth. That’s why it’s easier to think in terms of these national and world figures after they have been boiled down to my share.
Mind you, the space shuttle that just blew up cost your household only $32 ($2.1 billion to build plus $470 million for a single launch), but that doesn’t include the loss of life.
Of course, the $17,500 you will spend knocking down Iraq and then picking it back up doesn’t include the cost of human suffering, either. What is your son worth to you, if he is over there right now? What about all the Iraqis about to die?
$600 billion budget deficit for 2003? Huh? Well, I can clearly understand that figure when I realize that my little economic unit (household) is responsible for $7,500 of it. Of course, add in the $200 billion Iraqi war and the $100 billion economic stimulus package that Bush the Second is pushing, and my share of the deficit (and yours) grows to $11,250. And that doesn’t include interest. Or the billions to fight AIDS in Africa. Or all that other stuff Bush outlined the other night.
Now, I don’t know about you, but I would have trouble if I spent $11,250 more than I earn each and every year. Things are different when you get to print the money, of course. It helps when you are the world’s only superpower, too.
You might be thinking that lots more is being spent on your household’s account than you personally pay in taxes, so you’re ahead of the game. Tax on, MacDuff! We be making out. You would be wrong. Sure, some pay more and some pay nothing, but the average American household is right in there on these figures. Especially those to whose eyes these words are phosphorescing out right now. You see, a goodly amount gets siphoned off before you ever get a chance to fork it over via payroll deduction.
Your household’s share of the total GDP of America is $125,000 per year. Increasingly, that’s flipped burgers and service charges, but it still includes a rapidly-shrinking amount of real manufacturing. Think of dirt and other things going in one side of a building and cars rolling out the other side. Lots of that gets taken in the form of taxes you never see, not to mention corruption and outright theft. Your annual salary is what is left after those items. Then the real taxing begins.
Your share of the federal budget each year (and this does include the interest) is $26,250, some of which got snagged ahead of your paycheck. Then there are state income taxes, property taxes and sales taxes and license fees and…you get the idea.
This new Homeland Security Department is costing you $462 in its first year alone. Feel safer?
I could go on and on in this vein, and probably should, but the point now should be obvious. All these huge governmental program costs are real and substantial and being paid directly by you and me. And each year, we fall farther behind due to the deficit spending. There is a natural consequence of this progression and it results in you owning nothing and those who collect the interest on the debt owning everything.
You see, each year you pay $19,375 interest on the national debt (5% interest) and $14,375 (5%) on the nation’s private debt ($287,500 total is your share, by the way…plus your share of the national debt, your total indebtedness is $675,000). Does the private debt interest sound a lot like your mortgage? That is no coincidence. Unlike your mortgage, however, the national debt grows by $600 billion each year, with no principal paydown…ever.
Those payments go to the banks and other investors, of course. Due to the annual trade deficit, the amount by which we import goods for which we incur more debt because our exports aren’t enough to balance off the two, the interest increasingly flows out of the country. Your share of this year’s trade deficit is $6,250. So, of the total budget deficit ($7,500 is your share this year), $6,250 ends up owed to foreigners. Yes, it is this easy. No, it isn’t apples and oranges. Maybe oranges and tangerines, but the effect is ultimately the same as if it were all oranges.
Repeat after me: There is no such thing as a free lunch. Eventually, all American debt would be foreign owned. Right now, it’s only about 40% in foreign hands. Eventually (and this day is much closer than you could possibly believe), the interest on the debt would consume every penny of the GDP. I say “would” only because the chickens will roost long before then.
War might be the answer, you think. After all, it bailed us out of the Great Depression. Well, probably not (and neither did FDR’s socialism run amuck, either), but that’s another story. Remember, war consumes productivity and destroys capital. No free lunch, don’t forget.
There’s only one single, logical, end result. The US dollar will become worthless. That’s the only way the government (you and I) can possibly pay the interest, even, let alone the outstanding indebtedness.
Hyperinflation. Already, the dollar has gone down 95% in a single century (thanks to the Federal Reserve, but that is another story altogether). 90% of that has occurred in my lifetime (3 cent stamps in 1950 and 37 cents today, don’t forget). The dollar declined 30% just in the past year, in case you weren’t paying attention. Notice the trend – it is not your friend.
Expect the hyperinflation after the current deflationary period ends. Bush’s neverending War on Terrorism is designed merely to be the distraction. A lot of foreigners will be stuck badly when paid off in dollars that are worth a hundredth or a thousandth of what they are today. Unfortunately, so will most Americans, who ultimately hold the rest of the debt in the form of stocks, bonds and cash.
We’re still in the real estate bubble. Actually, it is a mortgage bubble, truth be known. Refinancing with equity pullout is what is keeping way too many of us afloat at the moment. That is about to end.
The die is cast and there is no way out. No way. There is absolutely no way to pay the piper without making our currency worthless first. There is no other way to pay the interest, either, once the rates start to rise again.
That’s why Bush the Second is spending like there is no tomorrow. He knows there isn’t. Even before Bush, government was ballooning. Since 1998, we have lost 2.4 million manufacturing jobs, thanks to NAFTA and GATT. During the same period, 1.7 million new government jobs were created. Bush is on pace to surpass those figures by a country mile. No free lunch, don’t forget. Government consumes production. More deficit spending. More debt. In just the past 20 years, government debt has gone up nearly 400%. That sounds like a lot until you learn that private debt increased by almost 500%.
If you have the ability, put some of your assets, especially anything denominated in dollars, such as stocks, bonds and savings accounts, into something that will hold its value: tractors, durable goods, cattle, gold, silver. You know. Not collectibles. Your Pokemon card collection won’t be worth squat after the crunch. That way, you will end up with something when the dust settles. Trust me, our masters have already done this in spades. You won’t even be able to buy groceries with your Social Security check.
The Great Depression will have a new, lesser, name before the upcoming economic carnage subsides. And I don’t expect that to happen during what is left of my lifetime. America will fail economically, whether or not it is ravaged by foreign countries in retaliation for our imperialism or being stuck with worthless dollars…more likely, both.
Meanwhile, pull up a chair. Break out the beer and make some popcorn. The war is on TV, after all. You’re paying for it, so you might as well enjoy it. While you still can, that is.
EDWARD J. STEELE can be reached at: firstname.lastname@example.org
Copyright 2002 Edgar J. Steele