I.O.U.S.A - Addison Wiggin [108]
A year ago there was this signing ceremony in the Rose Garden for the new Medicare prescription drug entitlement, and it ’ s going to cost us trillions of dollars. This event was not unlike any of the others in the Rose Garden on a nice sunny day, with the president sitting at the signing table with a bunch of grinning legislators behind him taking credit for this “ great gift ” they ’ re giving the American people. But none of their money was going to get given to make this happen, because the federal government doesn ’ t have any money that it doesn ’ t fi rst take away from the taxpayers.
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There was no mention of the fact that this in effect was a new tax on the American people, and we didn ’ t know how we were going to pay for it. It was only grinning presidents and legislators taking the credit for a gift, which strikes me as a ridiculous continuing characteristic of how we do political business in our country.
Q: If we couldn ’ t afford it, why did we give it to the people?
Paul O ’ Neill: If you can get 51 percent of the people in the Congress to agree with the President ’ s leadership initiative to say we ought to do this, that ’ s all it takes. And I think it ’ s regrettably true there are a lot of people who don ’ t understand that when they get a gift from the American people, it ’ s from the American people and it can only be paid for with taxes over time. I think the confusion is aided and abetted by the fact that it doesn ’ t feel like we ’ re paying for it. It ’ s a lot like running up credit card debt: As long as you can pay the interest charges on your credit card debt, you can live way beyond your means. In fact, we as a nation are living way beyond our means, and for a period of time, there ’ s no doubt we ’ ve demonstrated you can get away with it. But I think we only need to look at the fate of other countries who ’ ve lived beyond their means for a long time to see you inevitably get into trouble.
If you look at Germany in 1923, they got to a point where their currency was so worthless that you needed a wheelbarrow to haul the currency that was needed to buy a loaf of bread. You get infl ation where people stop investing in your national debt, when they say, “ We ’ re not going to loan you money because you ’ re not going to be able to pay it back. ” It ’ s the same thing that happens to individuals and families. When you get extended to the point that you can ’ t service your debt, you ’ re fi nished. You know, so you go through a calamity — either you go through a terrible infl ation, which is a way of having a national bankruptcy, and you destroy accumulated income and wealth, and in fact you have a taking from all the people because suddenly their fi nancial assets are worth nothing. You know, are we going to have that right away?
No. But should the people who are in positions of political leadership know that and anticipate it and do something about it c16.indd 219
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for the American people, you bet — and now is the time to begin doing something about it.
One of the diffi cult aspects of this debt problem is that it ’ s not very transparent to people who are unschooled in fi scal and monetary policy. In a way, this problem ’ s a little bit like the famous example of if you throwing a frog into boiling water. If you throw him into the already boiling water, he jumps out right away. But if you put the frog in the pot of cold water and turn the heat on under it, the frog will let itself be boiled because it doesn ’ t respond to slow increase in temperature. Our debt problem is something like that. If we wait until we have a calamity and fi nancial markets shut us off because we ’ ve exhausted their belief that we can service additional debt, it ’ s too late. This is a problem that we need to deal with without letting the heat be turned up