"The United States debt, foreign and domestic, was the price of liberty. The faith of America has been repeatedly pledged for it... Among ourselves, the most enlightened friends of good government are those whose expectations of prompt payment are the highest. To justify and preserve their confidence; to promote the increasing respectability of the American name; to answer the calls of justice; to restore landed property to its due value; to furnish new resources, both to agriculture and commerce; to cement more closely the Union of the States; to add to their security against foreign attack; to establish public order on the basis of an upright and liberal policy; these are the great and invaluable ends to be secured by a proper and adequate provision, at the present period, for the support of public credit."
-Alexander Hamilton, 1790, First Report on the Public Credit
The First Report on the Public Credit showed obligations of $75,463,476.52, mostly due to the Revolutionary War. Since this first reporting the government debt has fluctuated, but purportedly only once has it been to zero-- in 1835 under Andrew Jackson. Within 12 months the Government had again borrowed about $30,000. You can follow the ebb and flow of the US debt on this link to the Treasury Direct site: http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm.
The Reports on the Treasury Direct site clearly show that we have always had debt. It is often said “Why do we have debt? Is it necessary? Can we repay it?”
The US budgeting process calls for a 2 year budget, resulting in a spending plan that is uncertain of how much revenue will be received and when. In addition, U.S. annual revenue is not received evenly throughout the year and many expenses must be paid at times that don’t match when the revenue comes in. Unlike the US budget, a personal budget can be adjusted if there is limited cash. One might pay the required expenses and postpone discretionary spending when facing a personal cash shortfall. The US government however evens out normal peaks and valleys of revenue by using reasonable short term borrowing.
In addition to the inevitable fluctuation of revenue there can be unexpected needs or crisis. For example, during Jimmy Carter’s term there was a fuel shortage and runaway inflation. During George W. Bush’s terms the US was attacked by terrorists and fought two wars. These unanticipated expensescreated the need for borrowing.
These are just a few of the challenges that go into the Federal budgeting process. It is not as simple as putting cash in an envelopes marked for expenses. Though difficult, the US government has shown it can be budget reasonably, when the group of over 400 Congressional Representatives cooperates.
Reasonable borrowing is normal and acceptable. One must consider the size of the budget and realize changes may be analogous to turning an aircraft carrier. Perhaps instead the questions should be about when the amount borrowed become too much or if the debt load be handled without financial crisis.