When tax-and-spend becomes borrow-and-spend

Peter Bradshaw

I.O.U.S.A — a thoroughly admirable picture by documentary film-maker Patrick Creadon — takes the driest subject in the world — America’s national debt — and makes you deeply ashamed of not having been worried about it before now.

Its thesis is that America’s crack-cocaine-style debt addiction is a more serious problem than either terrorism or global warming. The budget deficit of the U.S. has risen to an eye-watering $9tn; its trade deficit is $738.6bn; its political leaders are casual about waste, and its feckless, want-it-now citizens buy stuff on credit and have abandoned the habit of saving, drummed into them by their provident parents and grandparents.

Creadon and his camera team follow General David Walker, the former U.S. comptroller as he travels across the country, attempting to tell America what it very much does not want to hear. America is spending much, much more than it earns. The result, as Mr. Micawber might have put it, is misery. Or future misery, anyhow.

It is all very well for Keynes to say that in the long run we are all dead — but our children will be alive. Mightn’t they have to pick up the bills?

Dishonest and pusillanimous politicians of both parties are terrified of unpopular tax hikes, says Creadon. So they borrow the money. During the second World War, America issued war bonds, and U.S. citizens were told that buying them was a stern patriotic duty.

Nowadays, debt is quite different. Debt is sexy; it can be repackaged and reconfigured in a hundred financial instruments that generate income. The political right, supposedly the stern guardians of financial rectitude, are as spendthrift as anyone else. Tax-and-spend has become borrow-and-spend. And naturally, only unsophisticated hayseeds who don’t understand the financial world would worry about the political consequences.

But wait — who is lending America money? Not Americans, but foreigners: largely the Chinese, who in any case enjoy a massive trade imbalance. China now has such hefty loans that these amount to what Creadon calls a “nuclear” financial weapon.

— © Guardian Newspapers Limited, 2008