In the 1960s, I attended a conference for academics in the State Department building in Washington, D.C. The main address was by Vice President Hubert Humphrey, who outlined a number of expensive foreign aid programs being studied for possible implementation. After his talk, he opened the floor to questions from the audience.
"How can we afford all these costly programs?" one person asked.
The answer, I think, has become the basic philosophy of all governments of the U.S. since then. Humphrey replied: "We are the richest country on earth. We can afford anything we want."
When time comes to pay for programs that we are undertaking as a government, we either pay for them with taxpayer money from the general treasury, or we borrow.
I have heard a defense of borrowing: "We don't have to worry. We are only borrowing from ourselves." Much of our public debt is actually owned by U.S. citizens, but a large part is also owned by people in the United Kingdom, Japan, China and other states. If these foreigners decide to stop buying U.S. bonds and notes, I do not know where we might find others who would want to lend our failing economy more cash.
Social Security has a different fund from the general fund. For many years now, Social Security income from the Social Security tax has exceeded the amount paid out to retirees under that program. The "excess" money is then moved over into the general fund with an IOU left in its place.
One day soon, the number of baby boomers who retire will rise to the point where there is no longer any excess, and those IOUs will have to be cashed to cover the shortfall caused by the increased number of retirees with Social Security benefits.
Anytime the general fund falls short, we simply raise the national debt ceiling and obtain funds needed by selling U.S. treasury bills, notes, bonds, TIPS and other instruments.
As of November, the U.S. public debt stood at a total of $10.6 trillion.
I suspect the new bailout rescue programs proposed by President Barack Obama might increase the size of our national debt by nearly $1 trillion, perhaps more.
Interest paid for the public debt in fiscal year 2008 was $412 billion. Interest paid out has no value; we buy no goods or services, just the ability to use the borrowed money to pay for governmental programs we cannot cover with taxes paid into the central government.
Only defense and human welfare programs have larger budgets than the interest on the national public debt. As we borrow more, that interest will grow accordingly.
Of course, our government prints money. The paper on which our money is printed wears out with usage and is simply replaced on a one-to-one basis. If we print more money than we burn up, the result is more dollars chasing the same items and inflation is the result.
Obama needs to think big to take dramatic measures to "fix" the national economic crisis. He will surely need to borrow more money for those measures.
If none of the stimulus packages work, and we can no longer borrow from abroad, we may reach an impossible economic quagmire.
But I strongly believe the president has the strength of character to pull us slowly out of our present crisis. We should all support his efforts because he is the captain of our ship of state, and that ship either survives or sinks for all of us. With Obama as our new captain, I believe we have a much better survival likelihood.
I hate to think how our grandchildren and great-grandchildren will respond when they try to pay off the national debt that arose in our days. Our national debt is really a tax on future generations to help us deal with our current economic crises. Our debt is so large that I suspect nobody currently alive still will be alive when it is finally paid off in full.
Tom Nichols is a retired college professor who lives in Gainesville. His column appears regularly and on gainesville times.com.