SCOTT DREYER: A Comfortable Myth: “Federal Funds”

0
Scott Dreyer in his classroom.

Yes, truth is lacking. – Isaiah 59:15

The rich rules over the poor, And the borrower becomes the lender’s slave. – Proverbs 22:7

I am no economist, and I want to be mindful of the Dunning-Kruger Effect: “People with little knowledge or skill think they are smarter than they are.” My academic experience with economics comes from thankfully heeding my sister’s advice in 1983 and taking two semesters of it while a freshman at William and Mary.

However, as a history major and teacher who is concerned about the future for us all, I am alarmed.

I don’t know how to put this delicately so I won’t. Our US government is broke. Not just “flat broke,” but “26.5 trillion dollars in the hole” broke.

When you and I spend money we do not have, we have to borrow and that is called “going into debt.” When our Congress and President spend money our federal government does not have, that is called “adding to the National Debt.” The rate of increase of that debt should alarm us all.

The graph linked here shows how the debt keeps climbing. The shaded regions represent years with recessions, but you will see that even in strong economic times, the debt has kept ballooning.

We didn’t hit our first trillion dollar debt until 1981, the year Ronald Reagan (R) took over the White House from Jimmy Carter (D). In other words, it took our country from George Washington to Reagan–192 years–to rack up one trillion dollars of debt. However, we doubled that debt to two trillion by 1986, just five years later. We doubled it again to four trillion after only six more years, by 1992.

President George W. Bush took office (2001): $6 trillion debt.

President Barack Obama took office (2008): $11 trillion debt.

President Donald Trump took office (2017): $19.8 trillion debt.

Today: $26.5 trillion

By spending all that money it doesn’t have, the federal government has to blow 8.7% of its budget just on interest payments alone. Instead of investing that 8.7% on our defense, schools, senior citizens, parks, healthcare, etc., it just goes to pay interest on that massive debt. What an outrageous waste! Nowadays, interest rates are historically low. God forbid what happens when those rates rise again and the interest payments gobble an even bigger chunk of the federal budget.

As I write this, July 31, the first relief package to help people unemployed through no fault of their own expires. The Democrats in Congress want a new relief package of $3 trillion; the Republicans want to spend $1 trillion.

There is no easy answer to help employees, families or business owners struggling in these challenging times, but any way you slice it, those $1-3 trillion dollars is money the US federal government simply does not have.

So how does our government spend money it does not have? Either borrow or print more out of thin air. The US government already owes over $1 trillion to China, and even more to Japan. By printing more money, each dollar is worth less and less, because there are more dollars in circulation. (When you put the words “worth” and “less” together, you get “worthless.”)

Expect to see prices rise accordingly, and that puts a pinch on most everybody. Former Senator Judd Gregg (R-NH) recently wrote a column warning, “When the dollar is worth 60 cents.”

Despite this ticking time bomb, almost no one in the media or politics is talking about it. Instead many keep cooing reassuringly about “federal funds” that do not exist. This dishonesty just creates a false sense of security. On the issue of national debt and so much else today, the Jewish prophet Isaiah predicted it right thousands of years ago:

“Truth is lacking.”

As our debt gets scant attention, our national narrative focuses instead on racism, inequality, removing statues and renaming places. There is a place for these conversations. But as I see the news, some people act like they don’t realize the Civil War ended in 1865–the North won by the way–but are instead trying to re-fight it.

Ironically, by getting torqued up about historical characters who died some 150 years ago and slavery then, we are ignoring today’s and tomorrow’s slavery. The Bible says, “the borrower becomes the lender’s slave.” That is, as our country borrows more and more, we are selling ourselves and future generations into slavery to our lenders.

Sadly, many politicians of both parties have realized the best way to get re-elected is to keep promising “free goodies” to the voters, but that reckless spending of money we don’t have is making us and our children financial slaves whether we know it or not.

We need to wake up and fight for our economic emancipation, lest we all become enslaved by a crushing debt.

– Scott Dreyer

NOTES:

Dunning-Kruger Effect

https://www.youtube.com/watch?v=y50i1bI2uN4

US Debt Clock

https://www.usdebtclock.org/

US National Debt since 1966

https://fred.stlouisfed.org/series/GFDEBTN

5 Facts about the National Debt

https://www.pewresearch.org/fact-tank/2019/07/24/facts-about-the-national-debt/#:~:text=Net%20interest%20payments%20on%20the,8.7%25%20of%20all%20federal%20outlays.