I was having a conversation with a friend the other day and he started going off about how we're living beyond our means and how we've racked up trillions in debt and we're just going to be passing this tab along to our children and grandchildren. It's the same false story that's been propagated everywhere. It is the false analogy of the government as a household: that our means are limited and unless we tighten our belts, become thrifty and save, the U.S. will go broke.
Let me begin by challenging the notion that we are living beyond our means. With something like 20 million people out of work or underemployed in the U.S., that is the definition of living beneath one's means. Those people could be contributing to the total output of goods and services if they had jobs. Our economic output could be far greater than what it is currently and the proof lies in the fact that we're only using about 79% of our industrial capacity.
If someone ran a business that was capable of producing 1,000 widgets a day but ran it to produce only 790 widgets a day, that person would be viewed as a bad manager. Yet for a nation, it is seen as living beyond our means?
Moreover, what are our "means"? They're the labor and resources that we have. They determine how far we can go and how high our standard of living can be. In America, we have abundance, not lack. We literally pay farmers not to grow food when there are people starving. That's not living above your means, that's just stupidity.
For most people, when they say we are living beyond our means, they are speaking from a financial point of view. Almost universally, they are referring to money, not our real assets or real wealth. Their belief is that we've run out of money. But have we? Have we run out of dollars? The next time someone tells you we're broke, ask if the U.S. has run out of dollars. That will stop them dead in their tracks and they will realize what they've said is not true.
But then they'll hit you with, "Yeah, but you can't just print money because it'll be worthless and that's not creating wealth." Perhaps, however, the "printing" of money to employ people, build roads, bridges, schools, infrastructure, science research centers or to provide health care or so many of the other things that we need, does create wealth and it raises the standard of living of everyone without debasing anything.
Our grandparents fought World War II, which racked up debts and a deficit far greater as a percentage of GDP than what we have currently. Did that bankrupt the U.S.? Are we, their children and grandchildren, paying it back today? Or do we have to give back the roads, bridges, infrastructure, manufacturing plants and savings created during that deficit-spending boom? Are those things not ours? Is it a debt that has to be paid off? Of course not. The whole claim is preposterous. Those are things we inherited, part of the wealth we currently enjoy. So why do people keep saying this about today's spending and future generations?
The national debt (if you want to call it that, it's already a misnomer) is simply the amount of dollars the federal government has spent in excess of the amount it has taken in taxes over the past 224 years. Since the birth of the republic in 1789, the federal government has issued $16.7 trillion dollars more than it took in. Those are dollars that we own. And if we are to pay it back, whom do we pay it back to, ourselves? The government is, after all, us. Remember "We the People"? Just like it says in that document called the Constitution.