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Sometime this spring our national debt is expected to reach the debt ceiling Congress once set in a futile effort to limit deficit spending. But don't expect any change in policy or ideology from Congress or the president when we reach the $8.2 trillion limit. As Robert Reischauer, a former director of the Congressional Budget Office said, "It's an opportunity for mischief."
The limit means little anyway. It's set in terms of gross debt, which includes money owed by one part of our government to another. Programs like defense owe money to programs like social security, which despite the doom-and-gloom forecasts currently runs a healthy surplus.
A more meaningful measure of our national debt is public debt, the amount our government owes to external sources. That's about $4.7 trillion, or more than $15,000 for every person in the U.S.
But it's meaningless to most of us. Four trillion, eight trillion - it sounds like the distance to the nearest galaxy.
One way of making sense of the numbers is to figure the public debt as a percent of our gross domestic product. It's 37 percent, well below the late 1940s when it spiked to over 100 percent. And it's a lot lower than Japan's debt, which is almost 140 percent of that nation's GDP.
In any case, our society is still clicking along, with our schools and roads and airports and things functioning, if not to everyone's satisfaction. It doesn't feel like we're broke.
But our debt matters. If the debt itself is intangible, the interest on the debt is real, and we're paying more than one percent of our entire GDP to service the debt each year. And unlike the 1990s, there is no easy out. With the baby boomers retiring soon, fewer people will be making money and more people will be needing support.
But what troubles me most about our debt is not the economics but the psychology of it. We want our tax cuts and our war on terror too. We want bridges to everywhere and I'll-take-a-rebate-check-please. It just doesn't add up. Where did we lose our collective common sense?
At the same time as we are running record-high annual deficits, the Bush administration is clamoring for permanent tax cuts. "We're careening off in a certain direction with no evidence in our political system that anyone wants to do anything about it," said Reischauer, the former budget director who now runs the non-partisan Urban Institute. And why should our political leaders do anything, he added, when it's akin to committing political suicide?
The something-for-nothing mentality pervades all levels of our society - and therein lies the real danger of our debt. As individuals, we collectively save about one percent of our GDP. The Japanese save 15 times as much. That means they can purchase their debt domestically - and purchase ours, too.
We haven't felt the impact of our debt because other countries have been willing to extend us a seemingly endless line of credit. But if some political or economic event causes that to change, our government will be forced to sell the debt internally. This means raising the rate of return on U.S. treasury bonds, which causes interest rates to rise and real estate values to fall. Because Americans are saving so little cash and are literally banking on value of their homes, a real estate crash would wipe out many Americans' savings.
This may all seem very distant, especially at a time when our state is oozing money out its very pores. But as we revel in a billion-dollar surplus due to high oil prices and $452 million in federal transportation money, it's worth remembering that the same oil prices are squeezing us every time we fill our gas tanks, and the federal money is borrowed against our own future.
What can we do about it? As individuals, we can put more of our earnings into savings. As citizens, we can stop throwing rotten tomatoes at politicians who cry foul on the freeloader mentality. Throw them instead at those who tell us we can have it all, but leave off the fact that our children will be paying for it.
Columnist Rebecca Braun is publisher and editor of the Alaska Budget Report, covering state policy and economics. She can be contacted at firstname.lastname@example.org. Sources: Concord Coalition, Urban Institute, U.S. Department of Treasury.