But, of course, all the reveling and apparitions of debt financed prosperity disappear like a morning mist when it comes time to pay, Extravagant living, waste, and hazardous borrowing against the future can reduce the best of us to bankruptcy, abject poverty, and even gnawing hunger from lack of the most basic necessities of life. Universal human experience verifies the bitter reality of the parable of the prodigal son, who "would fain have filled his belly with the husks that the swine did eat" (Luke 15:16).
The kind of frugality for which the Founders were famous was rooted in the conviction that debt should be abhorred like a plague. They perceived excessive indebtedness as a form of cultural disease.
Benjamin Franklin on Splurge Spending
One of the Founders who made his fortune through frugality and financial discipline was Benjamin Franklin. He had this to say concerning splurge spending:
"But what madness must it be to run in debt for these superfluities! We are offered, by the terms of this vendue, six months' credit; and that perhaps has induced some of us to attend it, because we cannot spare the ready money, and hope now to be fine without it. But, ah, think what you do when you run in debt; you give to another power over your liberty. If you cannot pay at the time, you will be ashamed to see your creditor; you will be in fear when you speak to him; you will make poor pitiful sneaking excuses, and by degrees come to lose your veracity, and sink into base downright lying; for, as Poor Richard says, the second vice is lying, the first is running in debt. And again, to the same purpose, lying rides upon debt's back. Whereas a freeborn Englishman ought not to be ashamed or afraid to see or speak to any man living. But poverty often deprives a man of all spirit and virtue: 'Tis hard for an empty bag to stand upright, as Poor Richard truly says." 291
The Founders' Policy Concerning a National Debt
The pioneers of the American commonwealth had the wisdom born of experience to know that the debts of a nation are no different from the debts of an individual. The fact that the indebtedness is shared by the whole people makes it no less ominous. The Founders knew that dire circumstances, such as war or other emergency, could force a nation to borrow, so they authorized the federal government to do so in Article I of the Constitution. Nevertheless, they considered it a matter of supreme importance for the survival of a free people to get out of debt and enjoy complete solvency in order to prosper.
This is reflected in the declaration of Thomas Jefferson when he said:
"I, however, place economy among the first and most important of republican virtues, and public debt as the greatest of the dangers to be feared." 292
Should One Generation Impose Its Debts on the Next?
It has always been popular in some countries to justify the practice of passing on the debts incurred by one generation to the next for payment. This was justified, particularly in the case of war debts, by the rationalization that since war is fought to maintain the independence and integrity of the nation, future generations should bear the burden of the cost.
But this was not the view of the American Founding Fathers. They felt that the wars, economic problems, and debts of one generation should be paid for by the generation which incurred them. They wanted the rising generation to be genuinely free -- both politically and economically. It was their feeling that passing on their debts to the next generation would be forcing the children of the future to be born into a certain amount of bondage or involuntary servitude-something for which they had neither voted nor subscribed. It would be, in a very literal sense, "taxation without representation." Clearly, they said, it was a blatant violation of a fundamental republican principle.
Jefferson Considered an Inherited Debt Immoral
Thomas Jefferson was particularly emphatic on this point. Said he:
"That we are bound to defray [the war's] expenses within our own time, and unauthorized to burden posterity with them, I suppose to have been proved in my former letter.... We shall all consider ourselves morally bound to pay them ourselves; and consequently within the life [expectancy] of the majority.... We must raise, then, ourselves the money for this war, either by taxes within the year or by loans; and if by loans, we must repay them ourselves, proscribing forever the English practice of perpetual funding." 293
The Founders Establish the Policy of Paying Debts Promptly
From the founding of the nation under the new Constitution, it became a policy of supreme importance to pay off the national debt. In his first term, President Washington wrote:
"I entertain a strong hope that the state of the national finances is now sufficiently matured to enable you to enter upon a systematic and effectual arrangement for the regular redemption and discharge of the public debt, according to the right which has been reserved to the government. No measure can be more desirable, whether viewed with an eye to its intrinsic importance, or to the general sentiment and wish of the nation." 294
The following year the President made it clear that this was no casual suggestion to Congress, but a matter of the highest priority:
"No pecuniary consideration is more urgent than the regular redemption and discharge of the public debt; on none can delay be more injurious, or an economy of time more valuable." 295
Just before leaving office, Washington made a final plea to the Congress to exert a greater effort to pay off the national debt, if only for the sake of the next generation. He said:
"Posterity may have cause to regret if, from any motive, intervals of tranquillity are left unimproved for accelerating this valuable end." 296
The History of the American National Debt
When we trace the history of the national debt, we find that the policy laid down by the Founders has been followed by every generation until the present one. One of the charts accompanying this chapter reflects the annual national debt from the days of George Washington to the present. By carefully tracing the pattern of these debts, we notice that after every war or financial emergency involving heavy indebtedness there was an immediate effort to pay it off as rapidly as possible. This policy was followed for the sake of the rising generation. The adult citizens of America wanted their children born in freedom, not bondage.
In our own day, however, a different attitude toward national fiscal policies has evolved. This is not only reflected in the skyrocketing thrust of an astonishing level of national indebtedness, but it has been accompanied by an equally profligate explosion in the cost of government operations, as reflected in the chart showing "Outlays of the Federal Government: 1789 to 2006."
The Risk in Violating Fundamental Principles
America's contribution to mankind's 5,000-year leap was achieved by rather strict adherence to certain fundamental principles which were part of the Founders' phenomenal success formula. As we have already seen, some of these most important fundamentals are being neglected if not repudiated in our own day. A most important area of neglect is the advice of the Founders concerning national fiscal policies. As we examine the outlays of the federal government and the U.S. national debt throughout the history of the nation, we find a number of notable things.
Outlays of the Federal Government: 1789 to 2006
2006 ....... 2,473,298,000,000
2005 ....... 2,399,843,000,000
2004 ....... 2,318,834,000,000
2003 ....... 2,157,637,000,000
2002 ....... 2,010,970,000,000
2001 ....... 1,863,770,000,000
2000 ....... 1,788,773,000,000
1999 ....... 1,701,891,000,000
1998 ....... 1,652,585,000,000
1997 ....... 1,601,250,000,000
1996 ....... 1,560,535,000,000
1995 ....... 1,515,802,000,000
1994 ....... 1,461,877,000,000
1993 ....... 1,409,489,000,000
1992 ....... 1,381,655,000,000
1991 ....... 1,324,369,000,000
1990 ....... 1,253,165,000,000
1989 ....... 1,143,646,000,000
1988 ....... 1,0
64,455,000,000
1987 ....... 1,004,082,000,000
1986 ....... 990,430,000,000
1985 ....... 946,396,000,000
1984 ....... 851,853,000,000
1983 ....... 808,364,000,000
1982 ....... 745,743,000,000
1981 ....... 678,241,000,000
1980 ....... 590,941,000,000
1979 ....... 504,028,000,000
1978 ....... 458,746,000,000
1977 ....... 409,218,000,000
1976 ....... 371,792,000,000
1975 ....... 332,332,000,000
1974 ....... 269,359,000,000
1973 ....... 245,707,000,000
1972 ....... 230,681,000,000
1971 ....... 210,172,000,000
1970 ....... 195,649,000,000
1969 ....... 183,640,000,000
1968 ....... 178,134,000,000
1967 ....... 157,464,000,000
1966 ....... 134,532,000,000
1965 ........... 118,228,000,000
1964 ........... 118,528,000,000
1963 ........... 111,316,000,000
1962 ........... 106,821,000,000
1961 ........... 97,723,000,000
1960 ........... 92,191,000,000
1959 ........... 92,098,000,000
1958 ........... 82,405,000,000
1957 ........... 76,578,000,000
1956 ........... 70,640,000,000
1955 ........... 68,444,000,000
1954 ........... 70,855,000,000
1953 ........... 76,101,000,000
1952 ........... 67,686,000,000
1951 ........... 45,514,000,000
1950 ........... 42,562,000,000
1949 ........... 38,835,000,000
1948 ........... 29,764,000,000
1947 ........... 34,496,000,000
1946 ........... 55,232,000,000
1945 ........... 92,712,000,000
1944 ........... 91,304,000,000
1943 ........... 78,555,000,000
1942 ........... 35,137,000,000
1941 ........... 13,653,000,000
1940 ........... 9,468,000,000
1939 ........... 9,141,000,000
1938 ........... 6,840,000,000
1937 ........... 7,580,000,000
1936 ........... 8,228,000,000
1935 ........... 6,412,000,000
1934 ........... 6,541,000,000
1933 ........... 4,598,000,000
1932 ........... 4,659,000,000
1931 ........... 3,577,000,000
1930 ........... 3,320,000,000
1929 ........... 3,127,000,000
1928 ........... 2,961,000,000
1927 ........... 2,857,000,000
1926 ........... 2,930,000,000
1925 ........... 2,924,000,000
1924 ........... 2,908,000,000
1923 ........... 3,140,000,000
1922 ........... 3,289,000,000
1921 ........... 5,062,000,000
1920 ............. 6,358,000,000
1919 ............. 18,493,000,000
1918 ............. 12,677,000,000
1917 ............. 1,954,000,000
1916 ............. 713,000,000
1915 ............. 746,000,000
1914 ............. 726,000,000
1913 ............. 715,000,000
1912 ............. 690,000,000
1911 ............. 691,000,000
1910 .............. 694,000,000
1909 .............. 694,000,000
1908 .............. 659,000,000
1907 .............. 579,000,000
1906 .............. 570,000,000
1905 .............. 567,000,000
1904 .............. 584,000,000
1903 .............. 517,000,000
1902 .............. 485,000,000
1901 .............. 525,000,000
1900 .............. 520,861,000
1895 .............. 356,195,000
1890 .............. 318,041,000
1885 .............. 260,227,000
1880 .............. 267,643,000
1875 .............. 274,623,000
1870 .............. 309,654,000
1865 .............. 1,297,555,000
1860 .............. 63,131,000
1855 .............. 59,743,000
1789-1849 .... 1,090,000,000
(Source: www.gpoaccess.gov; The Statistical History of the United States [New York; Basic Books, Inc., 1976], p.1118; Statistical Abstract of the United States [Washington, D.C.: U.S. Bureau of the Census, 1978], p.257.)
U.S. National Debt: 1791 to 2006
2006 ....... 8,366,862,634,494
2005 ....... 7,932,709,661,723
2004 ....... 7,379,052,696,330
2003 ....... 6,783,231,062,743
2002 ....... 6,228,235,965,597
2001 ....... 5,807,463,412,200
2000 ....... 5,674,178,209,886
1999 ....... 5,656,270,901,615
1998 ....... 5,526,193,008,897
1997 ....... 5,413,146,011,397
1996 ....... 5,224,810,939,135
1995 ....... 4,973,982,900,709
1994 ....... 4,692,749,910,013
1993 ....... 4,411,488,883,139
1992 ....... 4,064,620,655,521
1991 ....... 3,665,303,351,697
1990 ....... 3,233,313,451,777
1989 ....... 2,857,430,960,187
1988 ....... 2,602,337,712,041
1987 ....... 2,350,276,890,953
1986 ....... 2,125,302,616,658
1985 ....... 1,945,941,616,459
1980 ....... 930,210,000,000
1975 ....... 576,649,000,000
1970 ....... 389,158,403,690
1965 ....... 320,904,110,042
1960 ....... 290,216,815,241
1955 ....... 280,768,553,188
1950 ....... 257,357,352,351
1945 ....... 258,682,187,409
1940 ....... 42,967,531,037
1935 ....... 28,700,892,624
1930 ....... 16,185,309,831
1925 ....... 20,516,193,887
1920 ....... 25,952,456,406
1915 ....... 3,058,136,873
1910 ....... 2,652,665,838
1905 ....... 2,274,615,063
1900 ....... 2,136,961,091
1895 ....... 1,676,120,983
1890 ....... 1,552,140,204
1885 ............. 1,863,964,873
1880 ............. 2,120,415,370
1875 ............. 2,232,284,531
1870 ............. 2,480,672,427
1865 ............. 2,680,647,869
1860 ............. 64,842,287
1855 ............. 35,586,956
1850 ............. 63,452,773
1845 ............. 15,925,303
1840 ............. 3,573,343
1835 ............. 33,733
1830 ............. 48,565,406
1825 ............. 83,788,432
1820 ............. 91,015,566
1815 ............. 99,833,660
1810 ............. 53,173,217
1805 ............. 82,312,150
1800 ............. 82,976,294
1795 ............. 80,747,587
1791 ............. 75,463,476
* Rounded to Millions
(Source: Bureau of the Public Debt - United States Department of the Treasury; www.publicdebt.treas.gov/opd/opd.htm)
Debt Update. New all time high records have been set for deficit spending during the spring of 2006. Congress has increased the debt ceiling to NINE Trillion dollars. All things considered the burden of debt for every man, woman and child in the country has risen to over $100,000 each. Our nation is overspending at a rate of about $2 billion per day. During the first half of 2005, Americans got poorer at the rate of $80 million per HOUR. Headlines of 2005 offered the remarkable information that China - a Third World nation - lends the United States $300 billion per year. Vice President, Dic
k Cheney has reminded us that: "Deficits don't matter." United States citizens seem to regard thrift as a mental disorder and not a virtue. In the private sector during 2005, for every $19 Americans earned, they spent $20. If a thinking person will look at it, the absurdity becomes glaring. America has become an "empire of debt" and is sowing the seeds of her own destruction. (Empire of Debt, The Rise of an Epic Financial Crisis, Bill Bonner and Addison Wiggin, John Wiley & Sons, 2006).
First of all, as we have already observed, each generation of the past tried to pay off the national debt. In our own day, the importance of this policy has been de-emphasized. This development has occurred simultaneously with a policy of de-emphasizing the restraints and literal construction of the Constitution.
Beginning with the era of the Great Depression, all three branches of the federal government used the climate of emergency to overstep their Constitutional authority and aggressively undertake to perform tasks not authorized by the Founders. Extensive studies by Nobel Prize-winning economist Milton Friedman have demonstrated that every one of these adventures in non-Constitutional activities proved counter-productive, some of them tragically so.
The 5000 Year Leap: A Miracle That Changed the World Page 23
