The Price of Liberty is Eternal Vigilance
Shrimp 'n Grits
To borrow our way out of debt – a statement that defies all logic!
To borrow our way out of debt. Say it three times slowly and let it roll on your tongue like a glass of cheap, offensive screw-top wine. There’s just something that doesn’t taste, sound, or feel right – it simultaneously insults a multitude of our ingrained senses. The oxymoronic logic of this statement goes against everything our parents, relatives, and that endless string of schoolteachers taught us all our lives. It defies all fundamental economic theory we’ve ever learned during high school, through Economics 101, and for a few with advanced business degrees, graduate courses in business theory, policy, and finance.
As individuals or business owners, we would be quickly ushered out of any successful financial institution for even suggesting such a course of action. Accepted fiduciary benchmarks for loan worthiness, equity requirements, financial ratios, retained earnings, and credit history standards would doom such a preposterous idea to instant scorn and ridicule – unless it was the fatherless child of the federal government. Only from there would such a preposterous idea ever be conceived, gain a foothold, and thrive. It’s even worthy of a new defining term in public finance – Obamanomics.
By way of reference, it’s worth stepping back and simply defining a few fundamental principles of public finance. First, government cannot create wealth; only the private sector can accomplish that objective. Nonetheless, as first espoused in the Federalist Papers, government must enact regulatory measures that will protect, enhance, and create more wealth for its citizens. Second, federal revenue can only be derived from either taxes, duties, or debt; but each of these sources require sufficient private sector taxable income to fund current budget operations and to annually retire a obligatory amount of public debt –the bond interest and, eventually, the principle must be paid from public revenue backed by the full faith and credit worthiness of the taxable citizens.
Public debt, even the astronomical levels of new debt being issued by the socialist controlled Congress and Obama Administration, must eventually be repaid if the government of this nation, as we know it, is to survive. This can occur only if new taxable business and personal income, and wealth are created in sufficient quantities, as sources of federal taxes, to meet both the revenue demands for future federal budgets and annual federal debt service requirements. If the proposed level of astronomical federal borrowing doesn’t create a favorable financial environment for the private sector to sufficiently thrive and prosper, there will simply not be enough tax revenue generated to meet the revenue demands to operate the federal government even at current levels, notwithstanding the increasing socialistic demands for greater income redistribution and new, expensive social programs being espoused by the Obama Administration.
Regardless of what we may hear from the White House, Congress, or Charleston City Hall, there is no free money from Washington. We, and generations to come, will bear the weight of this financial folly if we stand by mutely and just let it happen.