Community discussions

Public Debt

by Tom Reynolds and Henry Kramer

January 6, 2012

Our federal government owes U.S. citizens and foreigners about sixteen trillion dollars ($16,000,000,000,000) and New York State owes sixty billion dollars ($60,000,000,000). Some politicians say that debt and deficits are good things. That dog won’t hunt. For hundreds of years, it was an accepted medical rationale that bleeding patients was a good way to cure illnesses. These debts are the economic equivalent of bleeding.

Alexander Hamilton deserved the description, “Genius”. As the first Treasury Secretary – think of him as a smart Timothy Geithner – Hamilton wrote that public debt could be a good thing, if, “… the creation of such debt should always be accompanied with the means of extinguishment”.

That’s pretty basic. Want a mortgage or a car loan? Before a sound lender will give you the loan, they want to know that it can be paid off. Our governments keep borrowing without any legitimate hope of paying it off. If our federal government generated a $100,000,000,000 (that’s $100 BILLION) surplus every year, it would take over a century of uninterrupted surpluses to pay off the current debt. If New York state could generate a $1,000,000,000 (that’s $1 Billion) surplus every year, it would “only” take 60 years to pay off its debt.

Now, some of that money is money Americans owe to other Americans, but no one knows exactly how much is held by foreign interests. If other countries lose confidence in American governments to pay their debts and call in our loans, our economy would be devastated. This is what happened recently in Greece; their citizens still elect their legislators but their creditors are telling the legislators what to do.