The biggest news this week revolves around the debt ceiling, deficits and defaults. However, this discussion seems to breed rampant confusion.
Our financially incompetent government has met the financially illiterate public—and in many cases the financially illiterate media too—to spread myths, lies and misunderstanding as far as the eye can see regarding the ongoing U.S. debt issues. Here's what's real- and what's not- in the government debt narrative.
Debt is not the only method to finance overspending
When our government spends more money than it takes in, as it has been doing both consistently and at an accelerating pace for the past 30 years, it has to find a way to pay for that overspending.
As any individual or business knows, there are choices you face when you need more money than you have at hand. You have to find a way to bring in more capital through making more money, selling some assets or securing financing.
That's the same decision the U.S. government faces as well. While raising taxes is an unattractive option given our already slow growth environment, plus the rampant government waste and mismanagement, the U.S. has plenty of assets that it could sell or lease in order to raise money to pay for overspending.
(Read more: Wall Street gets ready to trade defaulted US debt)
For some reason, the option of utilizing our assets is never legitimately discussed.The default choice for the government for the past three decades has been borrowing to pay for its overspending.
Because of that, over the last dozen year we've added more than $11 trillion in debt, creating the current balance of approximately $17 trillion that we owe and leaving us paying far too much of every dollar for past spending in the form of interest expense (approximately 9% for FY 2013).
In layman's terms, we are paying more and more of every tax dollar to finance past overspending instead of for investing in our future. Debt cannot be used as a continual financing solution without dire consequences.