Yesterday I drove my little Ford Focus from Detroit to Boston through southern New York in about 13 hours. I only stopped twice-once in Erie, PA, and once in Sidney, NY.
On my little adventure returning from Michigan, I came across an interesting radio show (it’s the only way to survive 13 solid hours of driving) talking about money. Specifically, it was Bob Brinker’s Money Talk, but I don’t listen to the radio unless I’m driving, so it was the first time that this combination of location, lack of rock-n-roll radio, and travel that landed me in this position to hear what Mr. Brinker had to say.
Now I don’t know Mr. Brinker’s lens, his political leanings, history, etc. However, I do wonder about his theory about the stability of sovereign debt. As many people may or may not know, countries like Greece, Portugal, Spain, Italy, and Ireland are all going under severe economic crises because: 1) they have been increasingly borrowing money to pay for year after year of deficit spending; and 2) nobody trusts them to pay off their debt anytime soon.
Of course, in the United States, we’re all over this topic of sovereign debt and deficit spending because we will soon “hit the deadline” and therefore default. (Which, by the way, is considered illegal by some). Mr. Brinker kindly added to this conversation by talking about the problems caused by deficit reduction, including the massive layoffs of government employees, employees of private companies that are funded by the government, etc. He said that a failure to raise the debt ceiling will only result in the stalling of the economy… the world economy.
I might add that Mr. Brinker kindly called the U.S. Congress “blockheads” for their stupid, stupid political theatre. While I agree, maybe I would’ve been nicer with the term.
So here’s what I wondered: Why have a deficit at all?
(Some) Higher education institutions are examples of non-deficit running authorities that aren’t terribly different in structure from a governmental unit. Some schools (Harvard, Yale, MIT) have put lots of money in endowments for longevity and financial stability of the institution. More importantly, they have the money banked to meet the needs of their students who cannot afford to pay for the education while demanding that those that are able to pay, to PAY!
Now, maybe that’s a little extreme. As Mr. Brinker (and my macroeconomics professor while I was an undergrad) pointed out, too much saving and too little debt will slow the economy. But, as most of the actors in our favorite show, U.S. political theatre pointed out, 14.5 trillion dollars of debt is a little much.
Maybe we’ll hit a solution before we turn into Greece. However, the curious piece for me is whether or not we’ll do it without sacrificing a lot of services.