Phendrana Drifts

US President George W Bush has signed a bill to raise the national debt ceiling to nearly $9 trillion.

The bill means the government can borrow a further $781 billion and stops what would have been a first ever default of Treasury notes.

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I am no economist, and I know there is an entire world of national finances I just don't have the background to allow me to fully dissect this, but let's consider this all the same.

First, to simply have an idea of how much money that is, we'll have to start doing some big conceptual thinking. First, let's convert it into Canadian dollars (since 95% of my audience in Canadian) - $10.5 trillion. Good. Now, let's compare it to a couple of things. First, let's say how much would I have to spend each day to spend $10.5 trillion in my lifetime. Assuming I live 80 years, or 29,220 days. Simple division gives us the figure of $359 million. Each day. Without exception. Hmm. That won't help, I think I would run out things to buy. I mean other than the obvious fleet of aircraft carriers and expensive foreign wars. I wonder if I can think of something else that will help put this in context...

How about this, in 2005 all of the governments of Canada combined, provincial, federal and municipal, spent $518 million. Every ounce of public spending in health care, education, defence, social services and maintaining the variety of public debts we have costs us $518 million as a nation. Fortunately, our governments took in $530 million, otherwise we would have our own debt and deficit problems. Still, comparing our government spending to the American debt is a lot like comparing apples to small cats. The United States is not like Canada, and spending is not the same as accumulated debt.

So, lets divide it on a per capita basis. There are 298 million in the United States. So again, employing division we come out with a figure of $35,234 (still using Canadian dollars) of debt per person. Phew, that is a bit more managable of a figure. That said, the gross domestic product of the United States is only $13 trillion (we're back to using American dollars). There will never be another time I hope where I use the word only in reference to $13 trillion. But the point is that the federal government (only one branch, so not including state debts and other public entity debts) of the United States has borrowed 70% of its GDP. If I borrowed like that, a guy named Guido would come to my door looking longingly at my knees.

So just before I go off on my rant about how very wrong this situation is I'll throw the Canadian figures up, now completely in Canadian dollars. Our federal government has borrowed an accumulated $523 million, down from $562 million in 2000. Our GDP is $1.252 billion, meaning Ottawa has borrowed 42% of its GDP. Or on a per captia basis, we each have our own $16,142 part of the debt. Looks pretty good for us, the legacy of some fiscal prudency by the federal government coupled with a booming economy in 1990's and into the 2000's.

Now to the meat of this - I'm not wild about public borrowing. In some circumstances, like the first and second world wars it made sense. But governments should still approach the question of borrowing carefully. And to be fair to the Bush administration and Republican congress, a lot of that debt is not new, they found it there when they entered office. But $3 trillion is new since 2002. A full third. And why do they need to borrow it? Sadly, the lack of political will to cut domestic spending or to increase taxes combined with the perceived need to go abroad on foreign military operations - i.e. Iraq.

This level of public spending, and public spending that is coming with no new schools, hospitals, infrastructure, or even, dare I say it, measurable improvement to the security of the American state, is appalling. The war in Iraq will certainly serve as the short term legacy of the Bush administration, and will in all likelihood be a problem beyond this administration, but that level of debt is a longer term reminder of W's years in the White House. It is enough debt that it will take a generation or longer of committed effort to pay it off. Spending levels that rival (and depending on how you crunch the numbers, exceed) the spending at the height of the Cold War. And for what?

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