There has been a lot in the news lately regarding the national debt. Suffice it to say it is staggering.
The amount of debt is in fact so staggering that the interest payments alone are the third-largest item in the federal budget. Only Social Security and the Department of Defense are larger.
Said a different way: the United States spent almost $414 Billion in fiscal year 2010 on interest on the national debt.
Compare this $414 Billion in interest payments to:
- Department of Education – $47 Billion
- Department of Veterans Affairs – $53 Billion
- Department of Energy – $26 Billion
- NASA – $19 Billion
- Small Business Administration – $0.7 Billion
And it gets even better: roughly one-half of the national debt is owed to the Federal Reserve. This presumably means that roughly one-half of that annual interest payment is also owed to the Federal Reserve.
So…why does the United States government owe money to the Federal Reserve in the first place?
Because the Fed prints our money, that’s why. Here’s how it works:
Say the government needs $XYZ dollars in currency printed. The Fed first charges the government for each bill it prints to fill this order. The Fed then lends the government the money it just printed, at interest. Additionally, the government has to take out a bond for $XYZ to secure the loan.
In essence, the government accrues three charges for this transaction, two of which contribute to the national debt, both as principal amounts and interest accrued.
OK, you say, that’s not such a good deal for the government but we have to have money so our hands are tied, right?
From the United States Constitution, Article I, Section 8:
“The Congress shall have power to…coin Money, regulate the Value thereof…”
The power to produce currency is constitutionally granted to Congress and no one else. The U.S. Mint was created using this constitutional power and is still handling the production of our coinage today.
But with the creation of the Federal Reserve in 1913 the power over our paper currency was stripped from the U.S. Mint and granted to the Federal Reserve. At interest.
There are lots of theories in circulation as to why this happened, ranging from believable to ludicrous.
Without delving into all of that, however, we are still left with the simple question:
Why pay for something that can be done for (practically) free?
Why transfer the Constitutionally granted authority to an organization that isn’t part of the government?
Why c0ntinue to do this with the national debt spiraling to dizzying (and dangerous) heights?
Whether there is something sinister at work here or this is just another example of government buffoonery doesn’t matter. What matters is that a stop be put to it, for the sake our the country and its citizens.
Stop willfully digging us into a deeper hole, Washington. It is past time.