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Debt: Present and Future, Private and Public, by Andrew Kline

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Date published: 1/20/2013


With all the hand-wringing and shouting most of us have never worked our way through the federal budget (much less crafted our own). We don't really know what's in it. We've been told: unfunded wars, tax expenditures (i.e., loopholes), and so much social insurance (Medicare, Medicaid, and Social Security) that someone else will have to pay for it. Yet we have never heard anyone explain at length how, with revenue dialed up here, and an expense dialed down there, we could over time balance the budget.


I was instructed by "White House Burning: Founding Fathers, The National Debt and Why It Matters To You." Despite the provocative title, two economists from MIT explain how a nip here and a tuck there can make all the difference. We've done it, or failed to do it, before. In 1812, we went to war without bothering to appropriate the means to pay for it. The White House was burned to the ground. We got serious about raising taxes and primitive central banking.

A budget is a moral document. Meditate on this fact: We spend the same amount on the military ($670 billion) as we do on Medicare, Medicaid, and Social Security combined. On a chart it is the same piece of pie. In the real world they are two utterly different but desirable things. We want a world at peace and our interests protected. We want a society that takes care of its elderly and less fortunate. The choices we make in each category tell us what kind of society we want. The pie is the picture of what the infamous "sequester" is all about.

As "White House Burning" points out, the government's finances are not like a family's finances; it is rather more like the finances of a family business. Businesses live and die by borrowing. Sole proprietors hear all the time that there is all sorts of capital seeking to be invested in enterprises just like theirs. Yet the family business that has operated for years with a line of credit can't get the loan to stay open or expand in uncertain days and months. What is going on? What makes it work?

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Andrew Kline is the director of the John Templeton Center for Thrift and Generosity at the Institute for American Values.