Political dancing around debt and deficit issues should stop

    We live in a time when getting into debt is almost like a fashion. Unlike fashion, which comes and goes by season, piling up too much debt may break your backbone. The policy makers at the federal level are very indifferent to this huge debt and deficit problem we are facing for sometime.

It looks like they are in a world of illusion. The fact of the matter is this: We are borrowing too much money. We are putting our children and grandchildren in jeopardy. No country in the history of human civilization has borrowed so much money. Every American has a debt equivalent to $28,000. For a family of four it comes to $112,000. We are keeping our future generation hostage to our present generation’s misguided public policies. While debt is a long term comprehensive economic problem, deficit reflects more of a current fiscal miscalculation – spending more than what is coming to the treasury. We have an average deficit of $350 billion per year since Bush administration came to the White House in 2001. To cover the deficit, we need to borrow money from the world market by selling US treasury bonds and hence the accumulation of debt – $8.5 trillion at the latest count. Almost half of the treasury bonds are purchased by foreign countries. On average every year $300 billion is paid on interest only. Our GSU budget is less than $100 million. So 3,000 GSUs could be funded by federal government’s one year interest payment on the debt – the amount is almost equal to the total budget for the whole higher education in the USA – it’s ridiculous but this is what is happening. Since Bretton Woods Conference in 1944-45, US dollar’s has become the de-facto international currency, and the dollar was pegged to gold (at $35 per ounce). On August 17, 1971, Nixon suspended the US dollar conversion into gold, and it became "floated" in the international monetary market. That decision gave United States a blank check to print as much dollar currency as Federal Reserve Bank needed without being backed by reserved gold. We borrow money from international market (read Asian countries) by letting them buy our treasury bonds. The Asian countries accumulated cash US dollar by selling goods to the US market. We paid in dollar because we are the only party to manufacture it by ‘fiat’. They love cash dollar because the "US dollar is the dominant reserve currency" of the world. Many of the Asian and other countries who have accumulated excess cash from trading with USA – are finding a save haven to invest in the US treasury bonds. Keeping cash dollar does not grow in value. One can get a decent interest by investing in the US treasury bonds. So far so good. One may argue, things are going fine – at least we are not in a catastrophic crisis. However, things may change and are changing. US dollar as a de facto international currency is being challenged by Euro since it’s inception in 2000. It is the emerging "reserve currency" challenging the US dollar. Some studies indicated Euro may be equal – if not more powerful than dollar by 2020. Asian countries may not be as much depended on treading with US as their internal markets will mature by then. Over and above, Asian countries may not be willing buyers of US treasury bonds to keep the US market afloat in future as their vested interest may not be linked to purchasing US treasury bonds. Lastly, the political dancing around the issue of debt and deficit need to stop. The Congress and the President need to address the issue seriously. We can’t continue to pile up Himalayan debt on assumption that we will be able to pay by dollar for ever. Things may not add up at the end of the day. Before it becomes too late, we need some action. The game of paying debt by paper money may have come to a full cycle.Dr. Nasir Ahmed is a public administration professor at Grambling State University.