Dear Ms. Prudence,
I've been watching the news, and reading newspapers, and websites, and asking different people of different political bents about their views and I can't make heads or tails of what's going on with our people in Congress. Do they know what they're doing when it comes to defaulting on our nation's debt? — Shaken in Milwaukee
Dear Shaken,
Let me say this to that: at least you tried. The last Tea Party member (excuse me, "Patriot") I spoke with about this didn't have a clue. Here's my taken on it:
• All our dollar bills (ones, fives, tens, twenties, hundreds, keep going as long as you like) have a value that's backed by the "full faith and credit of the United States Government." There's no value beyond that: no silver or gold or anything else you can get in exchange: just the full faith and credit of the government. So, not to scare you or anything, but on that fact alone, if the United States Government doesn't back it's dollars, then the full faith and credit part falls completely apart, which means your dollars don't have any value beyond whatever remaining faith there is from people who think the government might get itself sorted before your dollars aren't worth the paper they're printed on — no matter how big the numbers are in the corners of the bills.
• Let's try an example: say you had a friend who was going to have a baby within, say, a month or so and none of her so-called other friends have arranged a baby shower. You're a good sort who doesn't want this girl to be without a decent car seat for her newborn, and some onesies and blankies, so you recruit two trusted friends who agree they'll help you with last minute planning for, oh ... let's say 20 women friends. You get to work with invitations and decorations and their job is to arrange for food. On the morning of the party, they tell you they couldn't afford any food, or even a cake, and they're sorry but they're not even going to be there. Well, there you have it. The full faith (and credit) you had in your friends is going to ruin the day of an 8-month pregnant girl who can hardly stand but was, at least, looking forward to the shindig. It's embarrassing, and it pretty much ruins the pregnant girl's confidence (not to mention yours), all because your trusted friends didn't call Subway, or some other never-fail and relatively affordable food resource. Is this really the way you want your country — on a broader scale of course — to go? I think not. When you trust another to do what they say they'll do, and they promise they'll do it, and then they renege? Not pretty. And if we're talking more than a baby shower, could truly be catastrophic.
ยช What does catastrophic really mean when the full faith and credit (FF&C) of the government is breached (let's just say breached has nothing to do with how the baby's born) .... let's say the FF&C has been broken. So you have $100 dollars, backed by the FF&C of the government that issued those dollars, but that government is no longer backing them with FF&C. So will the grocery store have any faith in accepting your dollars? Why should they? They're as jittery about the value of those dollars as you are.
• You're probably thinking "well, if those two friends who reneged on the baby shower didn't have the money to buy the food, then what should they have done?" and that's part of the overall concern about defaulting on our nation's debt. We've been operating on borrowed money for a long time now. We've borrowed from citizens who've put their money in (what they hoped were safe) treasury bonds; we've borrowed from our own Social Security funds to use the money elsewhere, we've borrowed from China, Japan, and other countries. This borrowing (much like when you borrow) means the nation has been given loans based on the lenders' beliefs that we'll repay those loans according to the terms everyone agreed to. We pay billions of dollars every day to repay those loans, including interest on them. Imagine the nightmare of keeping the books! But the thing is, we're functioning as a nation on borrowed money. We all know that can't continue forever because eventually, we'll have borrowed so much, there won't be any money to pay off the loans. That's what's causing some people to go berserk: they feel their survival is threatened because if you borrow past the point of being able to repay, you lose everything. We all know that: we've had to pay loans for almost everything we own, and when we haven't we've lost our home, or our car, or the ability to borrow any more for tuition, or medical care, or even food and clothing.
• So why do we keep living on credit? This is more complicated that what we deal with at our dinner table when we're trying to figure out how to pay our bills. On the national level, it involves the kind of stuff banks, institutions, and large businesses deal with all the time. What they think of as "credit" isn't exactly the same as what you and I think of as credit, although we get a glimpse of part of it every time we write a check that we know isn't good, but it will be by the time it clears the bank. True, it's cutting it close, but it works as long as we get the money into the bank in time. Sometimes that means we have to borrow money from another account, which just shifts who we owe money to, but you can go on like thing for a long time: the circle of who you owe, and when, goes round and round. This is why our finances are intermingled with the finances of other countries. They're all part of this borrowing and lending thing, but on a much bigger scale than anything we've had to deal with in our personal finances.
• Getting out of debt takes two things: 1) buying only what you really need and 2) making more money. Sometimes you can't do both, so you might have to cut back on "what you really need". Let's say you've been happy with the national monuments throughout the nation: they're reminders of our history and bond us as a citizenry. But to survive, do we really need these? Some think we do: others understand it's comparable to curbing how often we eat at a restaurant, at least until our finances are in better shape. And others use these monuments (or some of them) to make political points that make no sense at all other than to give them a forum to create a ruckus.
• So let's say you're a member of Congress and you know we're spending too much and not taking in enough money, and we're in too much debt. At one time, our representatives would have talked with one another about what spending could realistically be cut without harming the well-being of the citizens they represent; and there'd be discussion about raising income which, when you're the government, means raising taxes because (sorry) that's how the government is funded. But our Congress has been negligent in doing the hard work this would entail. Instead, they make a sweeping decision to cut everything by some percentage; or to cut segments entirely without concern for what harm it will create; and for the last dozen years or so, they've refused to raise taxes on a small percentage of people who've been making more money than 40% of the entire population of the United States. Why? Because members of Congress have been gotten into office thanks to the funding of special interests (mainly businesses and industries) which are represented by lobbyists. The sole purpose of this is to create an environment in which these special interests can make money for their shareholders. To help them do that, they helped pay for the Congressional members political campaigns among other perks, so members of Congress will vote in the way these industries want them to vote.
• Please notice I'm referring to the Congress and not the President or the Supreme Court, which are the other two branches of government. The President decided that health care (which is the fifth largest economy in the United States), needed reform because 1) it had become so expensive that millions were without a health care provider; and 2) ill people had begun to bypass care or to use Emergency Rooms as their primary health care, which contributed to the rising cost of health care. The President's initial idea was along the lines of "Medicare for all", but thanks to lobbyists (and some others) his proposal riled up a whole bunch of people who believe his idea was a governmental effort to mandate their health care. A mandated decision by government, about a person's physical body, is appalling to these folks. They don't see the hypocrisy in trying to get a law passed that bans abortions and therefore mandates what happens to some people's physical bodies, but we're not supposed to put 2 and 2 together in this regard. Frankly, these folks have no idea what they're talking about: they're either misinformed (which is a pity) or they're so wealthy they don't care: they go to France or Germany for their health care: where outcomes are better than ours (even though we're told we have the best health care in the world. That's a lie.)
• So what's the solution? Well, that's what all the kerfuffle's about. Here's what I'd try to do: first, we have to keep our word to those who've loaned us money, even though it means borrowing more (raise the debt limit). Next, we have to drown the voices of extremists who prefer ideology over workability (this means turning off the news). Then we have to elect representatives who agree to one term because their sole purpose would be to pass a law that prohibits all lobbying of any member of Congress, past or present.. The only :special interests" that can reach a member of Congress would be individuals. Period. No "mass influences" would be permitted. This would take awhile to accomplish because the big money that's there now is deeply entrenched, and they'd run ads against the people who'd put them out of business. So we'd have to learn to use our DVRs to skip by those ads. Mainly, we've got to start somewhere. Once the lobbyists (big industry) are out of the government, we can get down to the real issue of spending less on things we don't really need, and raising taxes long enough to get out of debt. And with any luck, we'll have learned enough so that future generations don't get tricked as we did.
I hope this helps you understand what's at stake, and that you'll take a Tea Partier (sorry, "patriot") aside and smack them upside the head if they tell you a default is no big deal. You've already been disappointed with people who let you down when you counted on them, even if it wasn't a baby shower — and I already know it didn't feel good. Imagine the whole country feeling the same way. So smack some sense into those who think it's okay to default or to shut down the government. If they've loaned you money, try telling them you're not going to repay it, even though they feel strongly it's the ethical thing for you to repay them when you said you would. In that example, they're absolutely right, which is why they shouldn't be rooting to default on the nation's debts. They don't want you to default, and the same applies to the government, not matter how much you (or the government) might overspend ... and might need to borrow to repay until sanity is restored. At this point, that means the lobbyists, and heavy-duty influences from those with mega-bucks, have got to go.
For heavens sake: this should be so obvious!
Yours in full faith and credit,
Ms. Prudence
