The Honorable Harry ReidMajority LeaderUnited States SenateWashington, DC 20510
Dear Mr. Leader,
I’m writing in response to Treasury Secretary Timothy Geithner’s appeal to you to raise the debt ceiling.
I understand that you didn’t ask for my opinion. And with no political positions on my curriculum vitae, you may not even recognize my name. But I have co-authored two books warning about the United States’ fiscal situation, starting with Financial Reckoning Day in 2003 and followed by Empire of Debt in 2005. I mailed copies of the latter to you and the other members of Congress free of charge. While it may not be sitting on your nightstand, I trust that you’re at least aware of the book.
After we published the book, I wrote and produced a documentary, I.O.U.S.A., which was screened in competition at the Sundance Film Festival, nominated for a Critics Choice award and shortlisted for an Academy Award. The film attempts to present the fiscal crisis facing the United States in a way that the average American could understand. The film took two years to produce and premiered on Aug. 22, 2008 – almost a month before Lehman Bros. declared bankruptcy, kicking off the Panic of ’08.
So after a decade of attempting to bring the root causes of our economic woes to light, I humbly suggest that the shortsighted tone of Mr. Geithner’s appeal is itself part of the problem. It is, in fact, no different than Secretary of Treasury Hank Paulson’s frantic three-page proposal that kicked off the bailouts in September 2008.
Sir, in short, by raising the debt ceiling, we’re delaying the day of reckoning yet again. Instead of paying for our excessive spending today, we’ll pass that burden on to our children and grandchildren. I have three young children. And I, like many Americans, already find it a challenge to educate them and provide for their health care. Now I must also worry about what their future is going to look like…what opportunities will they find when it’s their turn to join the work force or start businesses?
Mr. Geithner shares his fears of a default in his letter to you. But his request simply means my children – everyone’s children – will have to deal with that default on their own.
Do we really want our children burdened by higher taxes, excessive government regulation, higher mortgage rates, reduced incentives to start their own businesses and, as things are going, the end of the freedoms that you, Mr. Geithner, the rest of the American public and I cherish?
Freedom is the very promise that America bestows on history. But now, through our own malfeasance, we are in a position of telling the world, “We cannot afford to offer you the opportunity to enjoy that freedom anymore.”
How did it come to this? And why perpetuate the very malfeasance that threatens our future prosperity?
For most of America, understanding the fiscal condition of the nation is no easy task. For that, they place their trust in you. No doubt, it’s easier to do exactly what our Treasury secretary is asking you to do – ignore the problem and continue to kick the can down the road. But I’m asking you, on behalf of future generations, to think deeper about the problem and begin addressing it today.
To help you with your decision, here are some images you can use to illustrate the magnitude of the national burden.
As Mr. Geithner stated in his letter to you, “In February of 2010, Congress passed legislation to increase the debt limit to $14.29 trillion.” To grasp that staggering figure, imagine stacking $100 bills on top of one another. To reach $14.29 trillion, your stack would soar 9,721 miles into the sky!
Said a different way, that’s like 1,767 mountains of $100 bills the size of Mount Everest piled on top of each other.
Of course, the current debt wouldn’t be a problem if tax revenue were exceeding our spending and therefore reducing the debt. But we both know that is not happening. Even if we taxed all Americans 100% of their income for an entire year, we still wouldn’t be able to pay off our $14.29 trillion hole
What’s more, the interest we’re paying on the current debt is forcing us deeper and deeper into the hole. According to the TreasuryDirect.gov website, the interest payment on our debt was a massive $1.13 billion per day – for a total of $413 billion – in 2010.
The interest payment alone amounts to record-breaking deficits hit during the Bush administration just a few short years ago. If you agree to raise the ceiling, you effectively agree to drive up the interest payments until they exceed tax revenue – creating a situation in which we’ll be forced to default, eventually. And the longer it takes to happen, the worse it will be for our children.
The Treasury secretary outlines how catastrophic a default would be for the financial system and the integrity of the United States:
Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs.
When, I ask you, do we begin addressing the root problem? When do we admit that we’re spending beyond our means and begin to address the problem in earnest? “We can live beyond our means for a very long time,” to paraphrase a leading financier from I.O.U.S.A., “and we can do it on a very large scale – but we cannot do it forever.”
The United States is like a private company suffering from a pension burden it did not plan for and that is losing market share because its products are no longer competitive. And it is as if the management has decided to take an extended vacation, rather than hold a meeting to find a way out of the hole.
In Congress, you don’t address the real problems. You talk around them, play politics with them and then make frantic appeals at the 11th hour to borrow more money to paper over the problems again for yet another year.
At this pace, how do you honestly believe the government will ever balance its books again? In the era of uncertainty created by mayhem in Washington and ever-increasing global competition, how do you expect the economy to get back on track?
Let’s put the numbers aside for a second. I’d like to ask you a simple question:
Imagine for a moment that you’ve chosen to smoke cigarettes all your life. You’ve ignored the warnings about them that appear all around you. Then, eventually, and unfortunately, you get diagnosed with lung cancer.
Luckily, you’ve caught the disease in its very early stages. The doctor presents you with two choices.
First, you can enter chemotherapy. The road to recovery, the doctor tells you, will be harsh. You’ll suffer extreme nausea. You’ll hardly be able to swallow from the ulcers you develop in your mouth. In short, you’ll go through hell in an attempt to beat the disease. But because you caught the disease after the first symptoms appeared, you have a high chance at a full recovery.
The doctor also offers a second alternative. He’s worked out a deal that allows you to rid yourself of the disease instantly. No pain. No suffering. No hell. All you have to do is agree to give the disease to your 2-year-old grandson.
Would you make that deal, Mr. Leader?
I trust you’ll make the right decision about our nation’s fiscal health. At the very least, there needs to be an honest debate over raising the debt ceiling. If you provide the rubber stamp Mr. Geithner is asking for, you will be as guilty as he of passing the buck. Each time the buck gets passed, the stakes get higher. The default Mr. Geithner fears only looms more ominous in our future.
The newly elected speaker of the House, John Boehner, has gone on record saying he’ll agree to increase the debt limit because we have to be “adults” about addressing the fiscal crisis the nation faces.
What, may I ask, is “adult” about failing to address this issue altogether?
Addison WigginExecutive publisher, Agora FinancialCo-author, Financial Reckoning Day and Empire of DebtExecutive producer, writer, I.O.U.S.A.
cc:The Honorable John A. Boehner, Speaker of the HouseThe Honorable Nancy Pelosi, House Minority LeaderThe Honorable Mitch McConnell, Senate Minority LeaderThe Honorable Dave Camp, Chairman, House Committee on Ways and MeansThe Honorable Sander M. Levin, Ranking Member, House Committee on Ways and MeansThe Honorable Max Baucus, Chairman, Senate Committee on FinanceThe Honorable Orrin Hatch, Ranking Member, Senate Committee on FinanceAll Other Members of the 112th Congress
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar, and Why it's Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
The Honorable Harry Reid??
HOW Can You Call A TRADER To There Country “Honorable”. Can you Explain That To Me!!
When people refer to stacked bills, I am always curious as to whether they are stacking bills “end-to-end” or whether they are stacking bills one on top of another as when they are bound from Treasury’s printing.
That aside, I find Mr. Wiggins’ argument very compelling. I am a big fan of “IOUSA.” And for years my “Spidey-sense” has been telling me our deficit spending (both gov’t and consumer) has been unsustainable.
However, letters such as Mr. Wiggins, are incomplete. We are not merely asking politicians to sacrifice their popularity. More importantly, we are asking the U.S. citizen (and our global “partners”) to change, and yes, sacrifice. Such letters, need to be accompanied by letters released in the form of “To The American Public . . .” This 2nd letter would then ariticulate the sacrifice involved in balancing the budget and why such sacrifice is preferrable to doing nothing. Writing TWO such letters requires true objectivity and insight.
I am not convinced that the House majority leader understands this any better than the Senate majority leader. Neither has a monopoly on wisedom or virtue.
My sincere apologies to Mr. Wiggin for mispelling his name in my earlier post.
Mr.Wiggins math is bad as the hight of 10 Everests alone exceed 9 miles. One of your figures has to be wrong.
Dear Mr. Wiggin,
First, you are absolutely right. Second, Mr. Reid doesn’t care for the country and our future. Third, our future obligation is not transferred to our children and grandchildren, but their lives will be devastated by the mounting debt. Lastly it means the death of our beloved country in a very near future.
This article shows how large the debt is in terms of a stack of bills piled one on top of another (not end to end):
Correcting the debt thing would sink the nation for a number of years… Americans today are no longer a self reliant people. They suckle the government teat for all they can get. If that teat dries up its katie bar the door. Chaos and mayhem will rule the day. Their attempting to delay that day as long as they can…
Reid must think we are all crazy for not recognizing an impossible math comparison. He must think Wiggin a person unable to think rationally as coming up with with unbelievable comparisons.
I believe you have it all wrong.
Lets assume the powers that be already calculated that a default is inevitable and there is no way to prevent it. The correct path in this case is to borrow as much as you can as fast as you can and spend it in building infrastructure (anything that will improve revenue in the future). The reasoning is that all defaults are equal, regardless how large it is, so why default on 14T when you can borrow to 25T then default?
Wow ,I am impressed (with the writing that is ) ,so reasonable sounding, diplomatic to the point of kindness, almost (i hate to say it ) political. After reading your responses to commenters on the 5 minute forcast I now see a another facet .
perhaps you could get him to listen to this instead….
i think you need to reread the part about everest. the math is spot on! great read. keep them coming
Sad to say that letters to politicians are a waste of time and energy. The problems as you have so well stated are not, cannot be, any kind of revelation to them. These politicians are intelligent, well-educated and experienced in legislative processes. They know the problems but choose instead Plan A to condemn our grandchildren and country.
A change will occur, as it must, when there are no choices, only imperatives and probably blood in the streets. So write letters if you wish to vent your frustration and rage, but rest assured the problems of the USA will be solved in time. Political action will not be part of that solution.
Addison writes the letter for us, fellow dear readers, not Reid et al. Reid, Pelosi, Clinton, etc. all entertain a fantasy view of the future of the world, whose anthem might be Lennon’s “Imagine.” In that world, there is no Constitution, no exceptionalism, no “Send me your…yearning to breathe free.” They, and most Republicans as well, have been duped by the international financiers and multinational corporations to sell our future and that of our children into hock which cannot be repaid. When the day of reckoning finally comes, the Secretary of the Treasury will instead stand before the World Bank or the IMF with his three-page proposal. And when the holders of the “toxic assets” react the way the American taxpayer did to TARP, we will be fortunate if our children and grandchildren do not pay with their lives on the field of battle. The policies of the sovereign, after all, are those of his creditors.
That is Addison’s warning. Make your decisions and preparations accordingly.
And thanks to Agora for reminding us every day.
I wish B. White would explain it for me because apparently he equating stacks with piles. Of course if he does not believe that Mr. Wiggins means what he writes then he is just laughable. Let me tell you when he says mountains that speaks volumes. Yes by all means stick with the absurd.
Wiggins, my good man, are you suggesting the U.S. default? or is there some other way to stay under the limit and start paying off the debt.
A way that does not depend on reneging on debts?
If the debt is paid with printed money does that avoid legal default even though if carried to excess it may be default in substance?
Sen. Reid beat Sharon angle to hold his Dem. seat. here’s a possibly biased summary of the tea service used in nevada:
Nonetheless, Reid and his staff executed a masterful campaign, going back to the spring, when he helped Angle win the Republican primary by going after the person he viewed as his more formidable potential opponent: casino executive Sue Lowden. The hope in the Reid camp was that Angle’s outside-the-mainstream conservativism would enable him to defeat her easily in the general election. Among her well-documented declarations: support for ending Medicare and Social Security, abolishing the Energy and Education departments, and vastly reducing the size of government.
Reid hammered Angle on those positions in television ads that ran for months. He highlighted a list of scores of prominent Republicans, including the mayor of Reno, the chairman of MGM Resorts and the first lady of Nevada, who endorsed Reid over Angle because of her extreme views.
3-to-1 he’s for the upskie. how they gonna print the money w/out the debt increase?
a little procedural lube and it’ll prob. be a voice vote!
I’m sure that people with 401k funds will be pleased that someone is encouraging the government to default on their obligations. Oh well someone has to pay the price and no matter what Addison thinks, one way or another all Americans will.
There is not one damn thing honorable about Reid, or any of the other crinimals you cc in your article. They should be hanged for the destruction they are wreaking on this country!
Honorable people do not borrow when they well know they cannot repay the lender. We will learn who is honorable and who is not when the debt limit is put to a vote.
Churchill in 1940 gave his hard-A speech in which he said ” I have nothing to offer you but blood,sweat and tears.” We need someone in 2012 to make the same type of speech in the open forum part of the presidential campaign. While he would not get elected, it would bring the issue out into the open.It might well influence the platform of the winning candidate.
If the tax revenues were $1 trillion / years (I don’t think they are), it takes 14 years to clear up this mess.
That is if it starts when the letter was sent and no more borrowing.
No complicated math !!!
Economy’s Direction = down
This is a keeper! Good info! Thank you for the article Addison.
Re: Debt Ceiling
Increase the ceiling by the amount of this next year’s interest on the debt, to assure all that the intention is to NOT default. Then let the Democrats come up with a budget for spending the anticipated income. Next year review the situation.
Make Way for the Gold Price "Zero Hour"
After a six month rally, the Nipponese index dropped 7.3%. Is it a turning point or a small correction?
After rising 3% out of the gate after Thursday’s bloodbath, the Japanese index embarked on a wild ride.
The American Association of Petroleum Geologists was nice enough to schedule its 2013 annual convention at my hometown of Pittsburgh…
Given a choice, Bernanke will likely strangle the currency (your money)... in favor of “strengthening” the economy.
If the Maker Movement Is So Great, Where’s Our Flying Car?
IRS scandals and the dangers of dissenting opinion in America.