The United States has passed a foreboding milestone: $28 trillion in national debt. In 2021, the federal debt alone is projected to be 102 percent of gross domestic product—which doesn’t include the $1.9 trillion “American Rescue Plan” that President Joe Biden recently signed into law. The debt-to-GDP ratio has only exceeded 102 percent twice in American history—1945 and 1946—as a result of the spending required to win World War II (103.9 percent and 106.1 percent respectively). With that victory secured, it immediately plummeted as the U.S. entered a new golden age of prosperity. However, while the American economy enjoyed an average growth rate of 3.1 percent between 1951 and 2020, the Congressional Budget Office is currently projecting that over the next three decades, that rate will fall to 1.8 percent.
This is on top of a growing solvency crisis in our nation’s most important “entitlement” programs: Social Security and Medicare.
In 2019—prior to COVID—the U.S. Treasury was already warning that these programs would be “bankrupt” (meaning, they would pay less to beneficiaries than they promised) much earlier than previously predicted. They warned that Social Security would be insolvent by 2035, and Medicare by 2026. I was born in 1988, roughly in the middle of the Millennial generation. That means that both of these programs, for which I am taxed a great deal, will be bankrupt 15 years (Social Security), and 27 years (Medicare) before I am even eligible for them. The situation is even worse for young people in their teens and 20s today.
Even more worrying, our birth rate has been plummeting. For a society to simply maintain its population, it must produce 2.1 babies per woman. The U.S. has been below that number since 1971. But in 2019—again, prior to COVID—it had fallen to a record low of only 1.7. That number has fallen even further during the pandemic, which means even fewer people are contributing to the system.
The reasons we have arrived at this financial juncture are various, and complex. But what is simple and straightforward is this: We are here because we have exhibited a collective lack of wisdom with respect to our national finances. For too long, we’ve believed we could have it all, forgetting that at some point—either now or in the future—every expense must be paid for, and every debt repaid. In doing so, we have forgotten the profoundly moral dimension of national finances, and the duty every generation has to pay its bills, and not unduly burden future generations.
A Warning From Our Founders
Our Founders warned us of this very situation. In his Farewell Address, our first President, George Washington, had a great deal to say about this topic.
“As a very important source of strength and security,” he said, “cherish public credit.” He enjoined his country to “[avoid] likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertion in time of peace to discharge the debts which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear.”
Speaking with the candor of a statesman, Washington reminded American politicians that it was essential for the American public to understand why minimal debt was best. “To facilitate to them [the public] the performance of their duty,” he said, the public must be reminded that the payment of debts requires revenue, and “to have revenue there must be taxes,” and “that no taxes can be devised which are not more or less inconvenient and unpleasant.”
This final point by Washington is worth considering. We normally think of taxation taking place in one way: the government directly confiscating our money. But it actually takes place in two ways: first, by direct taxation (the kind we normally think about), and the other by currency-devaluing inflation.
With direct taxation occurs, the people feel the burden immediately. Cost and benefit are aligned and experienced at the same time. There is no sugar high resulting from a benefit gained while the cost is deferred. Direct taxation is therefore the only honest way of paying for debts, and ensuring the American people, as Washington said, engage in “the performance of their duty.”
But there is another form of taxation the government has increasingly utilized since the 1960s, namely the taxation imposed by currency-devaluation inflation. What does this mean? It means that when the government has a debt, it covers the shortfall not by taxes directly imposed on the people, but by printing more dollars through the sale of government bonds. This increases the money supply (inflation) in such a way that more dollars are required to pursue fewer goods and services (which leads to currency devaluation).
The consequences of this are pernicious, for it not only leads to higher prices now, but it decreases the purchasing power of money that has already been earned.
Let me illustrate. Let’s say that by 2010, you had managed to save up $50,000. Earning that amount of money took time and effort. You can almost always expend more effort (at least until you are too old), but you can never get back the time it took to save that much money. And yet, what has happened to that $50,000 since 2010? Its purchasing power has decreased more than 20 percent! That means that what you could purchase for $50,000 in 2010 would now take you more than $60,000! That 20 percent is not only effort, but also time. So where did that 20 percent go? It disappeared because of currency-devaluing inflation—the “paying” of debts by printing dollars rather than direct taxation.
This has been taking place in the United States for decades. The people are being robbed and they don’t even realize it, because “currency-devaluing inflation” isn’t a line item on their income or their taxes. It’s an invisible expense which they must and will pay, but behind their backs, as it were. Like the frog that doesn’t realize the pot of water it’s in is getting hotter and hotter, the people don’t realize that the policies they vote for actually cost far more than they realize.
As the necessaries of life grow more expensive, this in turn creates fodder for politicians who are more than happy to run to the “rescue” once again with similar promises of largesse, whose costs are once again imposed behind (and eventually upon) the backs of the very people they claim to be helping.
By the time this happens, the correlation between cost and “benefit” has long since been obscured, while the politicians who sold it to them have already gotten the reelection they wanted. This discourages both private and public frugality, and to make matters worse, is often achieved by appealing to the plight of the vulnerable, whose fortunes it will harm the most in the long run. The long-term future of “the children” is undermined for the sake of “the children.”
The national debt is a complicated issue—more complicated than we can discuss in a short column. What is not complicated, however, is the reality that it is politicians’ favorite tool for manipulating the people for their own benefit. They will continue to do so until the people wake up.
But if that is what we hope to do, we face another choice that is both clear and stark: Either we decide to incur the cost of our past extravagance ourselves, or we continue to impose it on future generations. We can choose self-indulgence, or restraint; profligacy, or responsibility; cowardice, or duty; the national debt—such as it is—or national greatness.
The choice we make will in large part answer the question of whether or not we are worthy of the ancestors who purchased our liberty, safety, and prosperity at the cost of their fortunes, ease, and blood.
Joshua Charles is a former White House speechwriter for Vice President Mike Pence, No. 1 New York Times bestselling author, a historian, writer/ghostwriter, and public speaker. He’s been a historical adviser for several documentaries and published books on topics ranging from the Founding Fathers, to Israel, to the role of faith in American history, to the impact of the Bible on human civilization. He was the senior editor and concept developer of the “Global Impact Bible,” published by the D.C.-based Museum of the Bible in 2017, and is an affiliated scholar of the Faith and Liberty Discovery Center in Philadelphia. He is a Tikvah and Philos Fellow and has spoken around the country on topics such as history, politics, faith, and worldview. He is a concert pianist and holds a master’s in government and a law degree. Follow him on Twitter @JoshuaTCharles or see JoshuaTCharles.com.