Who Do I Pay?

The Outstanding Public Debt as of 17 Sep 2006 at 07:36:58 PM GMT is:

8.5 trillion dollars!!!

The estimated population of the United States is 299,521,300, so each citizen's share of this debt is $28,487.27.

I've said before that I don't understand economics. This is something that leaves me even more baffled than my general lack of knowledge should allow. Who do we owe? Somebody holds that loan. Is it the Federal Reserve? Is it Exxon/Mobil? Is the stock market supported by investments in the national debt? My lack of knowledge sent me on a search for more information.

Did you know that Alexander Hamilton invented the National Debt? Yep! While Ben Franklin was saving pennies, Uncle Al was blowing it faster'n a college student with a new credit card.

The real reason for the national debt

Following text is excerpted from the link:
A lot of folks presume that a national debt is just sort of an accident of poor management, that it results simply from the fact that politicians can't control themselves, and like children with a bag of Halloween candy will gorge themselves until they hurl. And they would be exactly right in that assumption except for one little word: accident. National debts are not accidents, they are designed for a specific purpose.

Alexander Hamilton, first Secretary of the US Treasury (and architect of the first national debt) wrote: "A national debt, if it is not excessive, will be to us a national blessing."

Why would Hamilton, political genius that he was (he was one of the co-authors of the Federalist papers) say such a thing? Because in his case and in his time, it was true. In 1790, the new US government had very little legitimacy and even less support. The British were all but ignoring the Treaty of Paris, a course of action that would eventually lead to the War of 1812. The French, our major ally, were in the midst of a revolution. Continental paper money had become worthless, yet there was little gold or silver in circulation. Little sagebrush rebellions (like Shay's) were starting to pop up. The government needed support.

In line with Jesus' admonition that, "where your treasure is, there will your heart be," Hamilton reasoned that if the national government took on the states' war debts and borrowed money from wealthy citizens to cover it (a 2-part plan known as "funding" and "assumption") the wealthy would suddenly have a vested interest in the success of the United States, just like a shareholder has a vested interest in the success of a company he owns. By creating a national debt, he could get the rich and powerful "on board," with a central government.

Of course, he understood that he who pays the piper calls the tune, meaning that the government would also never do too much that was not in the interest of those who funded it. The practical effect of a small national debt was a small wealth transfer from poor to rich. The rich paid taxes, but because they were paid by government in interest for money previously borrowed, they were net gainers. The poor paid taxes only to see a portion of that money siphoned off by the rich who had lent in years past.

The larger effect was that the rich and powerful gradually lost the incentive to undermine their own investment. The new government was stabilized and eventually established.Unfortunately, there can be too much of a "good thing," thus Hamilton's caveat that a national debt not be 'excessive.' A small national debt, started for the purpose of binding leading citizens to a new form of government, has in our day become a large national debt. Because the rules of interest do not change, the same transfer - borrower to lender, poor to rich - takes place.

There is another rule that remains the same: he who pays the piper calls the tune. And therein lies the danger of today's poor management. Those with tuppence to lend always receive a return from the pockets of the citizens, yet today they are not individuals who must also live under that government, but more often foreign governments who are in competition with it.

Are you beginning to see the light? Our founding fathers found a way from the get go to keep themselves wealthy at the expense of the less fortunate. At least, that is my take on Hamilton's idea. I wonder if our present-day leaders view our national debt "as a good thing?"

Thomas Jefferson's was a different take on debt:
"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the government at defiance. The issuing power should be taken away from the banks and restored to the people, to whom it properly belongs,"
And….
"The Central Bank is an institution of the most deadly hostility existing against the principles and form of our Constitution… if the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."

I don't know what to believe. Being the cynic that I am, you can bet my trust is not in the people who are making the rules ... or spending our money. It seems there is a need to let that huge tax reduction for "big business" expire. Unless there is no desire to clear the national debt. Afterall, what we owe China and the Mid-East is probably owed to American investors who have placed their bet on the Global Economy?

Maybe I am just confused. I guess I just don't "get it."

L8r