Monday, January 3, 2011

The crush depth of debt

By Donald Sensing

The wreck of Germany's U-352, sunk off North Carolina in May 1942.
What happens when a submarine reaches its crush depth? The question answers itself. World War II U-boat Capt. Hebert Werner related in his postwar book, Iron Coffins, that no one knew how deep a U-boat could dive. "Because," he said, "the only crews that found out were crushed a half-meter later."

The United States is approaching its financial crush depth. The liberal media (but I repeat myself) have proclaimed that the 111th Congress was the "most productive" in generations. One thing the Triple One did produce was debt - not merely mountains of debt but a whole Himalaya range. In fact, this Congress borrowed more money than all 110 previous Congresses combined. In the right-hand column of this site I run a widget that counts the federal debt as it winds toward the orbit of Pluto; as of today at 1.40 p.m. C. it stood at just under 14 trillion, 27 billion dollars.

Can you imagine what $14 trillion looks like? Let's start with a drawing of $1 billion in 10 stacks of $100,000,000 each, in $100 bills. As you can see, you could carry all this money by yourself to a commercial van in maybe 20 minutes and drive away with it. Note the red-shirted figure - the money reaches only to his waist.

Now here is a trillion dollars, still using $100 bills in stacks of $100M each. What is a trillion dollars? Well, it's a million million. It's 1,000 of the picture above.

Note that the red-shirted fellow is standing at the lower-left corner. Note also that the money is stacked twice as high as the first picture. As we begin the New Year, the federal government is in debt to the sum of 14 of these drawings, more than $44,000 for every American infant, child, man and woman.

So beginning in the first week of the New Year, as the 112th Congress convenes, our national task will not be merely to slow our descent toward financial crush depth, but reverse it. Herbert Stein chaired the Council of Economic Advisors under two presidents. He observed, "Economists are very good at saying that something cannot go on forever, but not so good at saying when it will stop." Fact is, like the sub crews we cannot know in advance what our crush depth is. We will only find out when we've reached it and borrowed one dollar more. And then it will be too late. We have to stop the descent, level off and then head back toward the sunlight by shedding debt. This can only be done by both cutting spending and increasing tax revenue. (Do not confuse the latter with increasing tax rates - tax revenues will rise when the nation's wealth increases; increasing tax rates stunts growth out of a recession.)

The road will be very difficult. I wrote in a column on Right Network that the American people (Tea Partiers included, I think) collectively want to cut the budget but individually don't want it done on their own backs. The two most profligate Congresses in our history were the 111th and (surprise!) its immediate predecessor, the 110th, both entirely controlled by Democrats. Fortunately, the 112th will be dominated, though not controlled, by Republicans. Unfortunately, the 112th's Republicans are still mostly of the political class who did not feel the voters' heat enough to see the light.

Herbert Stein also said, "When something can't go on forever, it won't." Sinking in an ocean of red ink cannot go on forever. Eventually the nation will become insolvent and collapse will follow. But how much longer can it go on? Unlike the old sub crews, we will physically survive reaching the crush depth of debt. But whether we can survive as a great nation is unclear at best, and highly unlikely in probability.

Making sure we do not discover our national, financial crush depth is the most urgent task before us. It must be the number one resolution for the New Year and the new Congress.

Closing note: Compare the live clock below with the image grab I posted above:

The Gross National Debt

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