Government debt versus Stein’s Law

Published 1:08 pm Friday, March 29, 2024

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On March 23, the US Senate passed a $1.2 trillion spending bill, presumably bringing an end to months of congressional combat, “stopgap” measures, etc., by accepting the House version of that bill without amendments that would require renegotiation.

As is usual with big government spending bills, it’s hard to get one’s mind around the total without dividing it by the number of people expected to pick up the tab.

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In this case, my rough calculation (based on the round number for the total and the latest estimates of US population is that the US government just ordered every man, woman, and child in America (yes, this means you) to cough up about $3,600.

Not all at once, of course. Much of it will just be borrowed and added to the “national debt” — currently about $35 trillion — with you as collateral. You didn’t apply for a loan, or co-sign the loan, but when the US government borrows money, it implicitly offers up your future earnings as guarantee of payment.

As I write this, Congress owes its creditors about $35 trillion, leaving you on the hook — or so they claim, anyway — for more than $100,000.

And no, they’re not making any effort to pay that debt down. They’re continuing to borrow, and continuing to let the borrowed principal increase even as interest payments on that principal constitute an ever-growing portion of their annual spending.

As economist Herbert Stein noted in 1986, “if something cannot go on forever, it will stop.”

The borrowing can’t go on forever, for two reasons:

First, ever-increasing “debt service” — payments of interest which never reduce the principal still owed — will eventually grow to more than the size of any plausible federal budget.

Second, as it becomes more and more clear that that principal will never be honestly repaid (at best, some kind of “trillion-dollar coin” scam might be contrived to screw creditors while supposedly “paying” the bill) and that even paying interest is getting questionable, fewer and fewer potential creditors will be willing to buy US government debt.

The borrowing will end sooner or later. It will end with, at the very least, de facto default, and possibly with the dissolution of the US government as we know it.

On the whole, I think that’s good news along the lines of finally kicking out a housemate who keeps stealing and selling household items to cover his gambling losses.

But, make no mistake, most Americans will end up much poorer than we believe ourselves to be at the moment. The fallout may make the Great Depression look like the Good Old Days.

When that time comes, make sure you have something in your wallet besides Federal Reserve Notes. “The full faith and credit” of the US government is only worth the paper it’s printed on because most people still don’t understand that they’re being conned.

When they DO start understanding that, they’re going to start demanding gold, silver, or cryptocurrency on the barrelhead. There’s no time like the present to start moving in that direction yourself.

(Thomas L. Knapp is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism. He lives and works in north central Florida.)