In 2007 when I began writing my New York Times best seller, "Black Belt Patriotism," the annual federal budget was about $2.9 trillion, the federal deficit was $161 billion, and the national debt was $9 trillion.
In 2013, as Obama ended his first term as president and transitioned into his second of skyrocketing government spending, the federal budget was at $3.8 trillion, the national deficit at $1.3 trillion, and the national debt was $15 trillion dollars.
Ten years later, for fiscal 2023, the Biden administration proposed a$5.8 trillion budget, with a CBO-projected $1.4 trillion deficit, as the national debt has doubled to almost $32 trillion!
The CBO reported, "The deficit amounts to 5.3 percent of gross domestic product (GDP) in 2023, swells to 6.1 percent of GDP in 2024 and 2025. … After 2027, deficits increase again, reaching 6.9 percent of GDP in 2033 – a level exceeded only five times since 1946.
"In CBO's projections, outlays [expenses] and revenues [incomes] measured as a percentage of GDP equal or exceed their 50-year averages through 2033. Outlays increase from 23.7 percent of GDP in 2023 (a high level by historical standards) to 24.9 percent in 2033. … Revenues amount to 18.3 percent of GDP in 2023. They then decline over the next two years. …
"Debt held by the public is projected to rise in relation to the size of the economy each year, reaching 118 percent of GDP by 2033 – which would be the highest level ever recorded. Debt would continue to grow beyond 2033 if current laws generally remained unchanged."
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Am I missing something? Do you think your household could withstand doubling your spending, debt and deficits while your income decreases, without the house of cards eventually crashing in a gargantuan way?
This week in particular, House Speaker Kevin McCarthy (R-Ca.) is trying to pass a debt ceiling increase of $1.5 trillion, while packaging it with $4.5 trillion in budgetary spending cuts, several of which are necessary to restrain the feds on both sides of the aisle:
• Setting discretionary spending at fiscal year 2022 levels
• Capping spending growth at 1% a year
• Pulling back unspent COVID funds
• Repealing IRS funding legislation
• House energy legislation called HR1
• Ending President Biden's student loan forgiveness
• Repealing some Inflation Reduction Act tax credits
But, speaker McCarthy, does the U.S. national debt really need to increase by $1.5 trillion?? I commend your spending cuts, but at what costs are these incremental leaps to the national debt ceiling compounding future consequences and woes on our posterity? And do we really want to pass the buck by increasing our "credit lines" to foreign ownership of the U.S.?
To add insult to injury, our vassalage to other countries deepens as they bankroll increasing amounts of U.S. debt. In 1970, only five percent of U.S. public debt was foreign owned. Fifty years later, foreign owners now own nearly one-third of our national debt!
The Peter G. Peterson Foundation explained, "Foreign ownership of U.S. debt, which includes both governments and private investors, is much higher now than it was 50 years ago. In 1970, total foreign holdings accounted for $4.9 billion, or just 5 percent, of DHBP. As of December 2021, such holdings made up $7.7 trillion, or one-third, of public debt. Of that amount, 54 percent was held by foreign governments while private investors held the remaining 46 percent. Because Treasury securities are backed by the full faith and credit of the U.S. government, creditors including foreign investors often view lending to the United States as a safe investment."
The national debt is not merely the result of excessive spending; it is also the result of revenues not being high enough to pay for government outlays. In other words, while the feds have spent trillions of dollars bailing out everyone from automotive businesses to zebra-loving environmental companies and nearly everyone else during government lockdowns of COVID, they have done virtually nothing to build up Main Street business productivity.
Outside of brief periods in our nation's history, U.S. presidents have not been very frugal and disciplined with debt management. But our founding fathers and first eight presidents did a much better job with money management than present leaders, who could learn a few fiscal lessons by turning back the clock to our early republic.
Critics can decry the founders' financial policies as too obsolete for our bloated federal bureaucracy, but resurrecting their policies and passion for bringing down the national debt would serve America well at this moment.
As Thomas West, Professor of Politics at the University of Dallas, explained in his excellent 2010 Heritage Foundation treatise, The Economic Principles of America's Founders: Property Rights, Free Markets, and Sound Money:
"It is true that there were bitter disputes over particular policies during the Founding era, such as the paying of the national debt, the existence of a national bank, and whether to subsidize domestic manufactures, and these differences seemed tremendously important in the 1790s. But in spite of these quarrels, there was a background consensus on both principles and the main lines of economic policy that government should follow."
According to data from the U.S. Treasury itself, on Jan. 1, 1791, during George Washington's second year as president, the national debt was $75 million, but that financial liability was incurred during the entire massive Revolutionary War as the cash-strapped Continental Congress, which lacked authority to levy taxes, accepted loans from France's government, the Spanish government, Dutch bankers and investors, etc.
And it was also true that Washington accrued $7 million more in debt during his entire eight years as president, but, with the genius help of Secretary of the Treasury Alexander Hamilton, they firmly established our flailing country on solid financial grounds and as a global power.
Moreover, in 1795, they absolved U.S. financial or debt obligations to foreign governments (though it did owe to some private investors in Europe) because American bankers privately assumed the foreign debts at a slightly higher interest rate then resold them at a profit on domestic U.S. markets.
The second U.S. President, John Adams, essentially broke even with the national debt during his four years in office by starting his term $82 million in the red, dropping the debt $4 million in two years to $78 million, then accruing back the same amount by the end of his term in 1801 largely in order to fund a larger, more mobile Army. Nevertheless, Adams cautioned against national loans saying they led to the collapse of many historical empires.
Thomas Jefferson was head and tail above the presidential pack when it came to federal spending and reducing the national debt. Despite fighting in the Barbary Wars and obtaining low-interest loans for the Louisiana Purchase in 1803, during his eight years in office Jefferson lowered the national debt from $83 million to $57 million.
And the next four presidents basically followed suit. Despite the war of 1812, further U.S. land acquisitions, and the building up of interstate infrastructure, etc., the next four administrations of Presidents Madison, Monroe, Quincy Adams, and Andrew Jackson were able to bring the national debt down from $57 million to a mere $33,703.05 cents (Yes, you read that correctly: $33 thousand dollars!)
You ask: How did our founders do it?
Here's a snapshot of their sentiments and policies toward national debt, which are further detailed in the third chapter ("Stop the Nightmare of Debt") in my book, "Black Belt Patriotism":
George Washington told the House of Representatives in 1793: "No pecuniary consideration is more urgent than the regular redemption and discharge of the public debt; on none can delay be more injurious, or an economy of the time more valuable," as Time magazine reported.
Washington also wrote in 1799 to James Welch, "To contract new debts is not the way to pay for old ones."
John Adams wrote to Thomas Jefferson from Paris in 1780: "I think we shall do no great things in borrowing [money], unless that system or some other, calculated to bring things to some certain and steady standard, succeeds."
Thomas Jefferson similarly admonished Samuel Kercheval in 1816, "To preserve [the] independence [of the people], we must not let our rulers load us with perpetual debt."
Thomas Jefferson also wrote to Fulwar Skipwith in 1787, "the maxim of buying nothing but what we had money in our pockets to pay for … [is] a maxim, which, of all others, lays the broadest foundation for happiness."
In spite that the national deficit nearly doubled under President James Madison, largely due to the war of 1812, the so-called "Father of the Constitution" said in remorse: "I regret, as much as any member, the unavoidable weight and duration of the burdens to be imposed; having never been a proselyte to the doctrine, that public debts are public benefits. I consider them, on the contrary, as evils which ought to be removed as fast as honor and justice will permit." He described national debts as "moral obligations" as far back in Federalist Paper No. 43.
President James Monroe, who shrank the national debt by one-third, said, "The vast amount of vacant lands, the value of which daily augments, forms an additional resource of great extent and duration. These resources, besides accomplishing every other necessary purpose, put it completely in the power of the United States to discharge the national debt at an early period."
John Quincy Adams, who also shrank the national debt by another one-third said, "The plain state of the fact appears to me to be that the load of taxation to pay the interest on the national debt is greater than the nation can bear, and that the only possible remedy will be a composition with the public creditors, or an authoritative reduction of the debt in one form or another."
Andrew Jackson made this passionate presidential commitment: "I stand committed before the country to pay off the national debt at the earliest practicable moment. This pledge I am determined to redeem." (In Jan. 1835, the national debt was paid off!)
Compare all those frugal fiscal founders' comments to the fact that Mr. Biden's 2023 federal budget will "nearly double nominal debt, growing from $24.6 trillion to $43.6 trillion over the next decade," according to the watchdog Committee for a Responsible Federal Budget.
Do you really want four more years of financial presidential leadership like that?
John Adams was right: "Facts are stubborn things."
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