First, a statement of historical fact: the United States has never defaulted on its debt. In other words, in the entirety of the republic’s history from the Washington administration until now the nation has always paid at least the interest on what we borrowed. Even during the Civil War and World War II. Even during the Great Depression. Even when there was no Federal Reserve and the money we needed to use to pay our debts was gold and silver rather than the tons of fiat money issued by the Federal Reserve.
Depending on the news reports I read, as early as midnight tonight if Congress and the president do not agree on some compromise that does something — extends the debt ceiling, reins in the federal budget, or works a fiscal miracle for a nation strapped with $15 trillion of debt — the United States will default. For the ordinary person, that means the Treasury Department won’t have the revenue to transfer to programs like Social Security and food stamps i.e. SNAP. Those two entitlements alone cover nearly 40 percent of the American population. God knows what will happen to stock markets and individual investments.
As I am fond of asking, “What would the Founders say?” It is safe to say that George Washington and Alexander Hamilton, the two men most responsible for first sailing the fiscal ship of state, would be alarmed at not only the amount of debt but the immorality of the debt. Debt was mainly a moral question to the Founding generation, a group who often did not live up to the ideal of paying as you go (note the fiscal disasters that marked the life of Thomas Jefferson, for example) but who understood that virtuous people did not remain virtuous if you trained them to receive something for (apparently) nothing. When a nation collects $2 in taxes for every $5 it spends on programs, it has made the decision to live on credit. And, eventually, borrowers hit a wall when they live a life of excess.
An article from Stratfor does an amazing job explaining the Founders’ moral outlook on debt. One quote worth pondering:
The Founding Father who best reflects these values is, of course, George Washington. Among the founders, it is he whom we should heed as we ponder the paralysis-by-design of the founders’ system and the current conundrum threatening an American debt default. He understood that the public would be reluctant to repay debt and that the federal government would lack the will to tax the public to pay debt on its behalf. He stressed the importance of redeeming and discharging public debt. He discouraged accruing additional debt and warned against overusing debt.
As we ponder the gridlock in Washington, D.C., perhaps we will recall that the generation who created this nation, though often maligned today for their lack of modern “values,” understood the timeless truths regarding human greed and human behavior far better than our current lawmakers and voters who have saddled this nation with inescapable debt.