29 Jul 2011 “In God We Trust”
Our nation’s motto was enacted unanimously in 1955 and signed into law by President Dwight D. Eisenhower. The words appear on every denomination of US currency. They are inscribed in stone in the Capital’s main lobby, its southwest entrance, and the House Chamber. Both houses of Congress begin each day with prayer. So, in this time of national crisis, when leadership seems lost, would we and our leaders not do well to seek God’s counsel?
God speaks plainly to his people about debt:
However, there need be no poor people among you, for in the land the LORD your God is giving you to possess as your inheritance, he will richly bless you, 5 if only you fully obey the LORD your God and are careful to follow all these commands I am giving you today. 6 For the LORD your God will bless you as he has promised, and you will lend to many nations but will borrow from none. You will rule over many nations but none will rule over you. Deuteronomy 15:4-6
43 The foreigners who reside among you will rise above you higher and higher, but you will sink lower and lower. 44 They will lend to you, but you will not lend to them. They will be the head, but you will be the tail. 45 All these curses will come on you. They will pursue you and overtake you until you are destroyed, because you did not obey the LORD your God and observe the commands and decrees he gave you. Deuteronomy 28:43-45 Proverbs says, “Just as the rich rule the poor, so the borrower is subject to the lender.”
If you don’t believe this wisdom, ask a Greek citizen how he feels right now with all of Europe telling him how to live and run his country.
The US is undeniably on a similar path. The graph on the left shows the growth of government debt as it relates to gross domestic product (the total economic output of our economy). It reveals some very dramatic things. First, across the top, you will note the names of the presidents in office for each time period with red signifying Republicans and Blue, Democrats.
To the extent possible, suspend your political views for now and let’s examine what the chart tells us in broader terms. Debt relative to GDP rose pretty steadily during the years 1981-1996, but then it started falling from 1997- 2001. Now look at the graph to the right to see that GDP (blue line) rose very quickly to relatively high levels during this period which was the Internet and dot.com boom. Also observe that the red line, unemployment, was declining very steadily at this point. In fact unemployment reaching lows of 4% prompted economists,
government and private, to worry that labor would become so tight that wage prices would begin to drive inflation. It didn’t happen though; productivity, at record levels, enabled the blazing economy to produce goods and services so efficiently that prices remained under control. Oh and one other thing, tax receipts were at record levels because 96% of the country was employed and companies were making huge profits. For a brief time in America’s recent history, the government spent less than it received.
The power of high productivity, low unemployment, and an economy running near full capacity gave potent meaning to Prince’s “Party Like it’s 1999.” But the good times of the late 90’s covered the sins of debt that still remained.
But unfortunately, economies don’t grow at capacity forever. The dot com boom ended badly, we went to war with Iraq, corporate scandals one after the other rocked Wall Street and Main Street. But even 1996-2000 when the economy was firing on all cylinders, the US did not pay down debt. You can see on the chart to the right that, while it leveled off, it was not reduced.
Today we find ourselves with a languishing economy, extremely high unemployment, entitlement programs in trouble, and as a result, ballooning federal budget deficits and debt. And with glaring clarity we see that our elected officials are powerless to address the root causes of our problem – overspending. Indeed both sides of the isle are to blame for this growing mess, and it is becoming clear that they cannot solve it sufficiently short of a balanced budget amendment. Because one Congress cannot bind another, future Congresses are very likely to continue their spending ways, regardless of what this Congress does. History as depicted in the charts above proves that, good times or bad, Congress continues to spend pile on the debt.
President Obama said earlier today, “this is not a situation where the two parties are miles apart, there are plenty of ways out of this mess.” It depends upon which mess to which the president refers. If he is referring to the debt ceiling, he’s right. Congress will not allow a default regardless of their reckless rhetoric on both sides.
If he’s referring to the loss of AAA, he was right again when he said “If we don’t come to an agreement, we could lose our country’s AAA credit rating, not because we didn’t have the capacity to pay our bills — we do — but because we didn’t have a AAA political system to match our AAA credit rating.” Mr. Obama, if you want a AAA political system, lead like a AAA president, not a sniping critic. Prayer would be the best place to start.
But if by ‘mess,’ the president refers to our $14.55 trillion debt, then he’s really onto something. This mess truly is a God-sized problem. Remember Deuteronomy 28:43, “The foreigners who reside among you will rise above you higher and higher, but you will sink lower and lower. They will lend to you, but you will not lend to them. They will be the head, but you will be the tail.” In just one year from April 2009 to April 2010, our debt to China increased by 18%. China owns about 22% of US debt, Japan 20%, and United Kingdom about 9%.
Senator Harry Reid, continued to stir the flames of fear today as he said, “this is likely our last chance to save this nation from a default,” after speaking with Treasury Secretary Timothy Geithner about the impact of inaction. “Secretary Geithner says it’s already started,” Reid said. “The international community is extremely worried.” They should be; they own half of our pie.
There continues to be a very low probability that the US will default on its debt, but a relatively high one that our credit rating will be downgraded from AAA to AA. If there is any real crisis, it is in the confidence of this country’s leadership. Pray for them and that they would seek Godly counsel. Politics as usual will not fix this ‘mess.’ Leadership and tough compromises will be required, and these apparently require a miracle.