Posted: Thursday, May 26, 2011 12:00 PM
The United States was already a debtor nation when George Washington was inaugurated as president in 1789.
The Continental Congress had borrowed millions of dollars from European powers to fund the American Revolution. Individual states had also borrowed to pay for their militias. It was a daunting obligation for a young country.
Still, that first year the total budget of the United States federal government was just $1.25 million, or $32 million in today's inflation-adjusted dollars. In those days, the government's only sources of revenue were tariff duties on imported goods and excise taxes on distilled spirits. (The Revolution had been fought, in part, as a result of onerous taxes. Taxation was a delicate topic to Americans still primed from a fight with the British.)
The national debt was a source of concern and great embarrassment to the Founding Fathers. While many of them, particularly the Southern planters in their ranks, were not strangers to borrowing money in their personal dealings, they thought the country should stand on its own financially to avoid the entanglements that can come with debt.
Unfortunately, over time the embarrassment subsided.
Today, the budget is $3.5 trillion and we are still a debtor nation, borrowing about 40 cents of every dollar spent. Even adjusted for inflation, Washington's budget would fund current government operations for less than five minutes.
Last week the U.S. hit its debt ceiling, the $14.3 trillion borrowing limit set by Congress. It's a huge amount of money that is difficult to conceptualize. Reuters noted that in 1981 Ronald Reagan famously represented the debt, not quite $1 trillion at the time, as a stack of $1,000 bills, 67 miles tall.
Today that pile would rise 900 miles, according to Reuters.
Congress is now arguing over raising the debt ceiling. Some say that we must increase our line of credit to avoid default, we must borrow more to pay the people who have loaned us money. Others say you can't borrow your way out of debt. We find it difficult to argue against that logic.
We should all be embarrassed that we need more than $14.3 trillion in borrowed money to operate our republic. If we are to remain strong, and free, we must live within our means.