In the End, There Is Only the Debt

by Victor Davis Hanson

NRO’s The Corner

Amid all the fighting over healthcare, Obama’s new promises, the Israeli spat, the Frum controversy, et al., looms the national debt. We can ignore it; get angry at it and say, “What the hell, I’ll quadruple it!”; have our “experts” write sophistic treatises about how it either doesn’t matter or is in truth good; hear our politicians claim it is secondary to the passing of a “progressive” agenda; or secretly smile that its service will require higher taxes and more “redistributive change”; but in the end, what we as a nation collectively owe others and ourselves transcends politics.

Cranky 19th-century-minded farmers used to preach about the tentacles of low interest. Apparently they had this strange idea that when interest rates went too low, the uninformed mob-like masses borrowed too much — and the resulting live-for-today demand for cheap money forced the once-endless pool of ready loans to dry up and interest to rise — and a few smarter people were sticking around to profit when this cycle played out like clockwork.

In short, the United States is floating far more loans than ever before in peacetime, and for longer scheduled durations, because interest rates are only a quarter of what they have been in the past. But this theory that we can endlessly multiply the size of our debt because the service costs remain low and static is a prescription for disaster — like the credit-card introductory offer of 2 to 3 percent for 6 months that hooks the naive into charging thousands of dollars, only to end up without the means to service the debt when the rate climbs over 20 percent. For a technocracy that is Ivy League certified and brags about its competency, we have fallen into the age-old trap that snares the naive ARM house buyer, the teenaged MasterCard mega-borrower, and the “free” coupon holder who heads headlong to Vegas.

That we are borrowing now at cheap interest hundreds of billions for things that are unnecessary or counterproductive will only make it worse, psychologically, when we have to pay it all back with high interest. It reminds me of the boom-to-bust neighbor who bought his superfluous super-duper, hydra-headed, metallic red-painted hydraulic vine-cutter with easy farm loans in the late 1970s and, when headed for bankruptcy in the 1980s, looked at the now rusted, useless contraption in his barnyard and sighed to me, “And I’m still paying 17 percent on that sucker!”

©2010 Victor Davis Hanson

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