The next time you hold a $10 bill, look at the portrait and say "thank you" for the blessing and burden of Alexander Hamilton.
Before there was a nation, there was a national debt. Alexander Hamilton's wisdom, endorsed by George Washington, was that public debt was not a bad thing — he called it "the price of liberty." More important, he persuaded the Founding Fathers that the United States should pay its debts.
See also: State governments face budget crisis.
In making the case for public borrowing, he recognized this reality: Governments love to spend. The accumulation of debt, he wrote, is "perhaps the NATURAL DISEASE of all governments."
History is clear: The nation's ability to borrow has provided both flexibility and stability while minimizing economic disruption and turmoil ever since.
Today, we're at a critical moment. The "natural disease" that Alexander Hamilton foresaw is out of control. The federal government continues to spend $3 for every $2 it collects, and borrows the rest. That amounts to $1.4 trillion in new indebtedness in 2011, bringing the nation's total indebtedness to just shy of the current legal limit of $14.3 trillion. The annual interest on that debt, $206 billion this year, is the fifth-largest and the fastest-growing expense in the federal budget.
That brings us to the Hamilton burden — his insistence that we repay our debts. "The creation of debt should always be accompanied with the means of extinguishment," he wrote in 1790.
As the president and Congress wrestle with how to accommodate the natural disease and raise the legal debt limit for the 13th time since 1995, they are also trying to systematically close the budget gap.
Should a target be set tying spending and/or tax revenues to a certain percentage of the gross domestic product? Should there be an automatic, across-the-board cut triggered if spending targets aren't hit? What about a balanced budget amendment? Or an independent board empowered to make cuts in Medicare if spending passes a specific threshold?
There's a more fundamental discussion to be held. Underlying the entire debate over appropriate taxing, spending and debt levels is the central question of what Americans expect of their government. What's the proper balance between the federal government and states? What's the proper balance between taxes and spending? Or the proper level of defense spending? What's the best way to curb health costs? Should Medicare simply provide health care for seniors, or should it assume a more ambitious role as leverage in corralling medical costs? Or would the free market be more effective?
With a $14.3 trillion debt outstanding, serious discussion is long overdue. We are learning where the politicians stand. We are also learning the details and dimensions of the choices they face. That raises the stakes for the 2012 election, where the ultimate decisions will be made by the voters — just as they should be.
This is a serious moment. After all, the clock is ticking. In February 1790, at Hamilton's direction, the new nation took out its first loan, a grand total of $19,608.81. Today, the federal government increases its debt by that much every 3/10 of a second.
Jim Toedtman is editor and vice president of AARP Bulletin.