The United States of America has been addicted to debt since it became a nation. A review of some pertinent facts is warranted. The last and only time The United States of America had no debt was under Andrew Jackson in 1835. From 1852 to 1857 there was 6 years of budget surplus, and 9 of 11 years from 1866 – 1876 and 10 of 12 years from 1880 – 1891. The last and only time there were budget surpluses for every year in a decade was the 1920’s. Since 1931, or the last 80 years, there has been only 12 years in which there was a budget surplus (47-49, 51, 56, 57, 60, 69, 1998 – 2001). The debt growth prior to 1971 was at a low rate. But since 1971 to 2010 and projected by the CBO to 2020, the debt is growing at a compound annual growth rate of 9% per year. The last time there was a balanced budget for a few years was 1998 – 2001. The total 12 year surplus in the past 80 years equals 589.7 billion. At the rate of spending by government today, 1.6 trillion debt projected in the current fiscal year, all these surpluses are spent in 4.5 months. In conclusion, America has had a budget deficit since 1835 and the debt addiction has been escalating rapidly since 1971.
The debt growth prior to 1971 was at a much smaller rate because of the strictures of the gold standard. When then President Nixon closed the gold window, countries could no longer redeem their dollars for gold. Nixon’s actions demonstrated that the USA was effectively broke by not having enough gold to pay all the foreign creditors. After this, the debt has been and is forecast to continue to explode at a 9% annual compounded growth rate. So the longer it goes the larger and larger the numbers become. Gross Domestic Product, GDP, since 1971, has been growing at 3% annual compounded growth rate. So the USA has been and is projected to continue to accumulate debt at unsustainable levels.
The Constitution gives Congress the budgetary authority to create taxes and spending authority for the general welfare of the country. But for many of the past 80 years Congress has abdicated its authority to act fiscally responsibly. And lately the fiscal responsibility of congress is abhorrent and abominable with no change in the rate of growth of the spending in the last 40 years with the absolute value of the numbers becoming so large that it frightens most Americans. And even with this back drop, the 111th Congress did not pass a budget. The 112th Senate will not pass a budget. Further, the initial the debt ceiling increase request was to pass a 2.4 Trillion dollar clean bill with no strings attached. This is like putting 2.4 trillion more on the credit card so the spending spree can continue uncontrolled and unabated. So the irresponsibility is increasing more and more and becoming utterly detestable!! Do we the people honestly think we have statesman in congress that will show fiscal restraint in the face of unabated and persistently large budget deficits? Not from the polling data!!
The gold standard put sufficient strictures on the congressional spending that the debt growth was held mostly in check. Today the Federal Reserve just prints as much money as is needed through its QE1, QE2… programs. So there is no restraint from the central bank either.
The answer put forth and pushed by, we the people, is a balanced budget amendment to the US Constitution. Obviously such an amendment would have provisions for it to be overridden with say a ¾ vote for very unusual times of war, like WWII, or unmitigated disasters, like acts of God, like the several of the recent Japanese earthquakes occurring simultaneously, as well as possibly a select few other provisions. Past leaders like Tom Daschle, who was once for this measure1, complain that this would be an “…unprecedented abdication of that authority…with no deference given to judgment of future leaders elected to carry out that fundamental constitutional mandate.”
But when have our leaders in Congress proven their fiscal responsibility over the long haul and especially since 1971? Answer, they have not. Therefore, can we really trust them to do their job? NO! In fact the actions of congress are becoming more and more fiscally irresponsible!! The fact that congress has passed balanced budgets before (12 out of the past 80 years, or 15% of the time) and they can do it again is missing the point that congress has much more often than not, 85% of the time, not done its job!! We know this and no longer trust our elected officials to act on our behalf. Thus, we the people are demanding a balanced budget amendment and substantial budget cuts be tied to the debt ceiling increase because we believe the crisis has gotten to such a point that is threatens to destroy the entire economy and thus our very way of life!!! We the people are demanding concrete and verifiable action to force and compel our elected officials to act on our behalf.
Lastly, we are in the early process of electing a new set of leaders who will hear our voices, who will govern strictly according to the US Constitution and who will again be the statesman like our founding fathers. But there are far far too few of them today and until such time that they are the overwhelming majority, tough strictures like the balanced budget amendment of the return to the gold standard are essential to ensure the survival of our Republic.
About the Author: William J. Michie, Jr. has a BS and MS degree in Chemical Engineering from Drexel University and an MBA degree from Rutgers University. He has had a 32.5 year career in Polyethylene Product Development with Union Carbide and Dow Chemical Corp. and is the holder of a number of patents.