Debt Dependence

We tried to speak between lines of oration
You could only repeat what we told you
Your axe belongs to a dying nation
They don't know that we own you
--The Who

Last night I saw two talk show segments that built on yesterday's thoughts about the country's addiction to spending and debt.

The first was O'Reilley's opening remarks positing that, despite the focus of many on dismantling the health care program, the biggest problem facing America is Federal government spending. During his monologue (at about 1:25), O'Reilley included a clip from Nancy Pelosi who claimed that "deficit reduction has been a high priority"--presumbly for the Federal government during her tenure as Speaker of the House.

That incredible statement found the usually focused O'Reilley fumbling around a bit--although he did suggest that such a claim is "outrageous" and anyone believing it "is a moron." Not sure if I guffawed more at Pelosi's statement or at O'Reilley's response. Pelosi's claim did remind me that, regardless of whether she was being disingenuous in her remarks or whether she was merely in denial about the actions taken during her watch, this is how addicts operate when their behavior is questioned.

The second was Judge N's closing remarks in which he summarized the history of debt in the US and its recent astronomical increases. Last year, I analyzed public debt data to better understand our debt history. Although the judge claimed that we've always had some debt, there was a period in the early to mid 1800s when we were essentially debt free.

The judge is correct that the real inflection point was the early 1900s, the so called Progressive Era, during which absolute debt levels and debt as a percentage of GDP began to take on pathological, addictive character. Judge N observes that it was during this period, 1913 to be exact, that the Federal Reserve and the Sixteenth Amendment were enacted. These became primary tools for growing government to previously unimaginable levels. The exponential growth in our borrowing habit is starting to hug the vertical asymptote (add a 2010 data point of $14 trillion to the top two graphs here for a current sense of the pattern).

Certainly, a step in the right direction would be people speaking out against raising the debt ceiling, as Judge N suggests. However, until the real resources that facilitate borrowing (i.e., the monetary printing press and taxation) are removed from government hands, fundamental enablers of our addiction remain in play.