Rembrandt, Belshazzar’s Feast, 1635, National Gallery, London
Mark Steyn, in his customarily brilliant manner, reflects on the scope and significance of the federal debt.
The fecklessness of Washington is an existential threat not only to the solvency of the republic but to the entire global order. If Ireland goes under, itâ€™s lights out on Galway Bay. When America goes under, it drags the rest of the developed world down with it. When I go around the country saying stuff like this, a lot of folks agree. Somewhere or other, theyâ€™ve a vague memory of having seen a newspaper story accompanied by a Congressional Budget Office graph with the line disappearing off the top of the page and running up the wall and into the rafters circa mid-century. So they usually say, â€œWell, fortunately I wonâ€™t live to see it.â€ And I always reply that, unless youâ€™re a centenarian with priority boarding for the ObamaCare death panel, you will live to see it. Forget about mid-century. Weâ€™ve got until mid-decade to turn this thing around.
Otherwise, by 2020 just the interest payments on the debt will be larger than the U.S. military budget. Thatâ€™s not paying down the debt, but merely staying current on the servicing â€” like when you get your MasterCard statement and you canâ€™t afford to pay off any of what you borrowed but you can just about cover the monthly interest charge. Except in this case the interest charge for U.S. taxpayers will be greater than the military budgets of China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey, and Israel combined.
When interest payments consume about 20 percent of federal revenues, that means a fifth of your taxes are entirely wasted. Pious celebrities often simper that theyâ€™d be willing to pay more in taxes for better government services. But a fifth of what you pay wonâ€™t be going to government services at all, unless by â€œgovernment servicesâ€ you mean the Peopleâ€™s Liberation Army of China, which will be entirely funded by U.S. taxpayers by about 2015. When the Visigoths laid siege to Rome in 408, the imperial Senate hastily bought off the barbarian king Alaric with 5,000 pounds of gold and 30,000 pounds of silver. But they didnâ€™t budget for Roman taxpayers picking up the tab for the entire Visigoth military as a permanent feature of life.
Read the whole thing.
I think myself that Mark is overlooking the obvious detail: that when, as he puts it, “you get your MasterCard statement and you canâ€™t afford to pay off any of what you borrowed but you can just about cover the monthly interest charge,” before much longer you wind up stiffing all your credit cards and burning your credit rating for the next decade. The government equivalent of stiffing credit cards consists of inflating your currency, so you can pay your debts after all using funny money worth a small fraction of what it was at the time those debts were incurred.
The US Government has not overlooked this solution. Remember Quantitative Easing? It is already underway and in process. I’m not sure who it was that remarked “Inflation is the cruelest tax,” but he was clearly right. Inflation rewards the improvident and punishes the responsible. Inflation strips the middle class of its accumulated savings in order to relieve the government of its debt.