lowes, Editorial director
The prospect of a surplus, however small, in the federal budget has caused administration officials and members of Congress to almost dislocate their shoulders patting themselves on their backs.
It also has provided them with a diversion with which to distract taxpayer attention from the still burgeoning national debt, now more than $5 trillion and still climbing.
In fact, the prospective budget "surplus" (which exists only if you count Social Security receipts) will hardly even slow the growth of the national debt.
And the national debt's growth is an issue of at least equal importance to the annual deficit because servicing that debt has become increasingly burdensome.
Alexander Hamilton, the nation's first secretary of the treasury, created the national debt deliberately, to establish the ability of the U.S. government to borrow when necessary (in wartime, for example) and so federal debt instruments could provide a solid backing for the notes issued by private banks, thus increasing the money supply.
Hamilton declared: "A national debt, if it is not excessive (emphasis added), will be to us a national blessing."
Unfortunately, the national debt, equal to almost 70% of the gross domestic product, must be considered "excessive," and therefore a burden rather than the blessing Hamilton suggested.
It might soon become a curse.
In fact, the national debt has increased by a factor of 17 since 1960 and interest costs now are more than $1,000 per person per year. This fact alone ought to make us all interested in how we got into this parlous state of affairs.
But who would want to read a book about the growth of the national debt?
Such a book might seem to be a wonderful sleeping pill on a sleepless night.
Wrong. In fact, Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt by financial historian John Steele Gordon, (Penguin Books, New York) is a lively, entertaining read.
In it, Mr. Steele shows how Hamilton created the national debt, how it has served the country well in times of crisis, and how it has been abused by the government since 1918.
For example, the national debt generally was less than 10% of GDP until 1918 (only five years after the introduction of the income tax) when it surged to 16% of GDP under the impact of World War I spending.
It has been less than 20% of GDP only four times since then, in good times and bad, despite the constant growth of the income tax rates that should have satisfied any spending urge without resort to debt.
In fact, the growth of the national debt almost seems to track the growth of the income tax, as if the greater the access to revenue, the greater the government's urge to spend.
After all, the more booze you put before an alcoholic, the more he'll drink.
Mr. Steele shows how deliberate decisions (mostly) and unintended consequences have both contributed to the growth of the burden of the national debt.
Mostly he shows how the national debt has been used by politicians to avoid making tough decisions.
Every taxpayer ought read this book. If Mr. Hamilton were around he would read it and be horrified at what the politicians have done to his blessing.