Ah, debt, our old friend and comforter in times of need. Who among us has never turned to easy credit in times of trouble? Mortgage loans on our homes, credit cards for flexible spending power, student loans as an investment in our own human capital. You might have a debt, you might have some debt, you might have debts.
But the United States of America has The Debt.
The definite article signifies two things. For one, it suggests that it is the most exceptional representative of its class. This is what we mean when we say things like “Twilight is the book to read in 2013″ (hey, they don’t pay me as a literary critic) or “that’s not a sports car, it’s the sports car.” It’s kind of like the old line about looking up a word in the dictionary and finding someone’s picture there.
More terrifying, though, is that The Debt really is the debt: it belongs to all of us and to the children of generations not yet born. It may be a fundamental aspect of democracy that no legislature can bind a future government, but we clearly have no difficulty living large and sticking them with the bill. We all have an intuitive sense that, in our republic established on the premise of self-government, “the debt” is shorthand for our collective spendthriftiness. It’s not just Washington’s problem; or, put another way, we are Washington.
I think that helps explain why otherwise sane people tend to lose their minds when they discuss this problem. An idea has been circulating recently calling for the Treasury Department to simply mint trillion-dollar coins and pay down its (our) debt to the Federal Reserve. (If you are already confused about why our left hand owes money to our right hand, you’ll have to read a more erudite writer and dig in to the history of “fiat money” and the Federal reserve.) Most people don’t remember a similar trope from the GOP primary last year, during which several candidates talked about having the Fed simply write-off the government debt it holds.
It’s hard to know where to begin with these schemes. The trillion-dollar coin idea is probably not legal. The law that proponents rely on (31 U.S.C. 5112) gives Treasury the authority to mint platinum coins and the law does not specify what value these coins have. But the very first section of the law says Treasury “may mint and issue only the following coins” and lists specific denominations. The platinum coin part, subsection k, authorizes commemorative coins.
But there is a bigger problem. Do we think that money is some fantastical construct utterly divorced from any reality? If it were that simple, why not pass a law allowing the President to sign his name to Monopoly money and require creditors to accept it as legal tender? We are lectured at length about the complicated economy when it comes time to spend hundreds of billions of tax dollars on “stimulus” programs. We could use some of that complicated economics now.
What would happen if we flooded the money supply with TWO TRILLION dollars instantaneously? I’m no expert on inflation, but that sounds like a risky move. And who is most hurt when the value of the dollar plummets? Do you think Bain Capital is going to get caught by those kinds of shenanigans? They could literally buy Monopoly money and avoid the crash—at least paper has a realizable value. No, it’s poor saps like me and you with a few thousands in savings who will be devastated by the move—those of us “stuck” in the dollar so to speak.
There is a story like this in Eric Metaxas’s excellent biography of Deitrich Bonhoeffer. Germany started printing money—the old-fashioned version of the platinum coin—and the value of its currency plummeted. Bonhoeffer’s father had a life insurance policy of $1 million that matured before he died. By the time he is paid, he could only afford some chocolates and wine. By the time he went to buy them, he had to choose between the two. Maybe our Federal Reserve could prevent inflationary catastrophe, but whenever we see governments trying to opt out of reality we see wheel barrels full of cash going around to buy candy bars. Here are some “stimulated” citizens in Bulgaria buying beer with piles of cash [some profanity in comments on site].
Mammon is a deceptive master, bringing with it a host of temptations and complications, in the words of a great philosopher. But wealth is only a proxy for value. We do not love our neighbors by advocating short-term gimmicks that debase the value of what they have earned. We would be roundly and rightly judged if our families spent twice what they earned and our best, most serious idea was a credit card shell game. How much worse to inflict that every family of our children’s nation! One could argue about whether the Fifth Commandment implies a duty from parents to children. But we aren’t exactly making it easy for our children to honor us when we persist in our unsustainable ways to their detriment.
The Lord grant them the grace to forgive us, and more wisdom than we ever had.