The Spending Crisis

Can I Borrow More?

Most media coverage of the main political fight in Washington these days refers to the “debt crisis” or “debt ceiling crisis”.

Debt is the result of overspending. More spending, in the absence of sufficient revenue, leads to escalating debt. With the US economy already taxed at levels that can negatively impact investment, further spending can only exacerbate the debt problem.

A more precise and fundamental headline would be “The Spending Crisis”.

Obama Reveals Spending Crisis

Unwittingly, President Obama made some remarks on Friday that really drew attention to the spending crisis. He wanted to emphasize that the reason for the “necessary” increase in the debt ceiling was not so that the government could spend more. Rather, he explained, it was to allow the government to pay the bills that Congress had already racked up. Again, he said he wanted to emphasize that.

This time, the President has found the head of the nail with his indiscriminate hammering. For years now it has been the pattern for Congress to spend beyond its means, following up with a routine increase in the Statutory Debt Limit to cover its profligacy. The ceiling has been raised ten times in as many years.

Addicts Getting a Spending Fix

So now here they are again, like drug addicts, asking for one last hit to cover their spending. It may very well be the last fix, not by the choice of political leaders, but by the grace of reality. As Economist Herb Stein once remarked, anything that can’t go on forever will stop. It is just the manner in which the stopping takes place that is unknown.

One More Fix

No one can predict the future. One thing is clear however. Another increase in borrowing capacity without a clear actionable plan to drastically curtail spending will only delay the inevitable day of reckoning, making it more severe than if dealt with today.

©Copyright 2011 Edward Podritske

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