Correction: A reader brought to my attention that my original posting said the 2009 stimulus act cost $787 million -- when it actually cost $787 billion. I knew that, but somewhere along the way, that crucial fact got jumbled in my brain. I've corrected it in the text. It does blow to smithereens my original point that borrowing for the Revolutionary War, adjusted for inflation, was roughly in the same ballpark as borrowing for the stimulus. The stimulus cost much, much more. Still, the overall theme of the blog post holds true. The Founding Fathers were heavy borrowers, and debt is not necessarily a bad thing.
There’s a new fiscal cliff approaching the country. This time, one hopes the country won’t fall off in the fog of ideology.
The cliff is real. Unless Congress agrees this month on new revenue or spending cuts that would decrease the nation’s deficit by $1.2 trillion over 10 years, automatic spending cuts, split evenly among defense and domestic spending, would go into effect in January. This likely would be disastrous for the nation as it tries to recover from a sluggish economy.
We’re in this predicament because of one simple ideology: That debt – any debt – is bad for the nation, and that all future borrowing by the U.S. must end if the country is to have a future. This was the position of the Tea Party wing of the Republican Party in 2011 when it refused to sign off on raising the debt ceiling. This resulted in a fiscal crisis that lowered the nation’s credit rating and, through higher interest rates, heaped untold higher debt on future generations.
These Tea Party debt warriors are true believers. Some have argued that debt financing is not what the Founding Fathers intended for this nation.
That, of course, is flat wrong.
Our Founding Fathers financed the American Revolutionary War by borrowing $43 million, mostly from Europe. Adjusting for inflation, that’s roughly $559.9 million in today’s dollars. By contrast, the 2009 stimulus act – an appropriation heavily financed through borrowing that Republicans have portrayed as an outrageous example of government gone haywire – cost $787 billion.
One paved the way for the country’s freedom. The other, many economists have said, prevented the country from sinking into another Great Depression catastrophe.
For most of its history, this nation has had some sort of debt. Without borrowing, it surely wouldn’t have had the resources to prevail during the Revolutionary War or World War II.
Today, we should have an honest debate about what the appropriate debt level of the nation should be. Most, including myself, would say the current debt level of $11.4 trillion is too high, and that the nation should embark on spending cuts and new revenue fairly soon.
But the idea that, in the future, the country can’t borrow one more dollar is not only wrong-headed, but dangerous. I’m sure that’s our Founding Fathers would say.