The national debt makes a lot of troubled credit-card borrowers look downright thrifty.
Just like those cardholders, the government is in danger of getting to where payments in interest alone get out of hand. But just as there are signs that some consumers are wising up to the pitfalls of credit cards, there were signs that Congress had begun to understand the importance of being more responsible with the budget and debt. But then the Senate went and blew a hole in that strategy with a terribly ill-advised recent vote.
Such are the things that make people cynical about government.
The national debt is $9.13 trillion. The gross debt interest last year was $430 billion, which includes intra-governmental accounts such as Social Security. But the net interest going out of the government is still in the hundreds of billions of dollars. Devoting that much of the nation's money to interest on the debt is certainly not responsible money management. The debt is a serious problem, in great part because a lot of it is being obtained by foreign countries, including China and OPEC nations. Does America really want to be in deep debt to those countries?
Most of the debt at the moment involves traditional investors buying Treasury bills and savings bonds, including buyers such as big banks and pension funds. But that group increasingly includes foreign governments, which currently hold more than $2 trillion of this country's publicly held debt, an increase of 9.5 percent from the previous year. As this nation begins to see what can happen in an economy where people can't pay what they owe, debts of that size to foreign holders can be a frightening consideration.
'Paygo' promise broken
But just when the outrageous borrowing and reckless management of funds was becoming obvious and it appeared government was going to do something about it, Democrats in the Senate delivered a terrible surprise. When Democrats won control of Congress, they promised a "Paygo" policy, where they vowed to "pay as you go" in budget items. Under that plan, any expense to government had to have an offsetting item to make up the difference. It was good economic principle, and it was good political thinking. But the Senate overwhelmingly voted recently to give more people relief from the alternative minimum tax, a move that reduced revenues by $50 billion with no makeup provision. The push for relief from the outdated AMT is needed. But so is a way to cover it in the budget. The Senate vote angered many deficit hawks, as it should have.
The fiscally conservative Blue Dog Democrats in the House, who have been a needed voice on budget responsibility, were especially upset at the turn of events. But so were like-minded groups outside Congress such as the Concord Coalition, which has long been a bipartisan voice on fiscal responsibility. The federal government must bring down its debt. Republicans and Democrats must work together to get it done, but Democrats look especially bad when they go back on their word.