The National Debt and the American People

A trillion is a million millions–and the United States owes twelve trillion dollars.  Every day this debt is costing American taxpayers over one billion dollars in interest.  Every day.  This fiscal year alone, the government overspent 1.4 trillion dollars, which is about 3.8 billion dollars per day.  All in all, the national debt already takes forty cents of every tax dollars just to pay interest–in other words, almost half of your income tax does nothing for the American people except keep your government’s nose above the water for a little while longer.  That is amazing.  All these statistics come from my recollections, having read an article in the Wall Street Journal online.

Blaming the government is too easy, however, especially in a nation where officials are elected by popular vote.  According to Christian authors David Chilton and Randy Alcorn, the United States government would not borrow so much money if the people themselves were opposed to debt.  The statistics seem to bear this out.  According to the Federal Reserve, consumer debt in August sat at 2.5 trillion dollars, which is mainly what “we the people” owe on credit cards and car loans.  On one- to four-family residences, we owe 10.9 trillion in outstanding mortgages.  The overall debt is 14.5 trillion dollars on mortgages, with farm debt accounting for only 113 billion dollars.  In other words, the American people owe more money than their government.  We are all in the kettle together.

How did we as a people get to such a point?  Where are we going?  What should a Christian do in light of it?  This essay will address the first question, leaving the second and third for subsequent postings.

To set the context for American policy and custom, it is first necessary to consider debt and interest in light of biblical law.  First, in the Old Testament, God established a limit to debt.  Every seven years, the Jews were literally told to drop all debts against one another (Deuteronomy 15:1).  The rationale seemed to be this: debt is a form of slavery, and God did not want His people, whom He just redeemed from slavery in Egypt, brought back into slavery again through debt (cf. Proverbs 22:7; Deuteronomy 15:15).  Moreover, if the people obeyed the Lord, there would not even be need for debt, for due to God’s blessing there would be no poor in the land.  Even further, they, as a people, would lend to other nations and not borrow; they would reign, and not be reigned (Deuteronomy 15:4-6; cf. 28:12).  Knowing, however, that the people would not obey, God also gave instructions about lending to the poor, stating that “the poor shall never cease out of the land”–a statement Jesus Himself affirmed to His disciples (15:7-11; cf. Matthew 26:11).  Therefore, it is a blessing to be free of debt; and only God’s blessing can eliminate poverty, the cause behind such debt.

Second, God also established a limit to interest.  Although He allowed the Jews to charge interest to foreigners, He repeatedly forbid His people from charging interest to one another (Exodus 22:25-27; Leviticus 25:35-37; Deuteronomy 23:19-20).  In Hebrew, the word “interest” literally means a “bite” (neshekh).  Interest takes a bites out of the debtor, which is doubly cruel if the debtor was forced to go into debt due to poverty or taxes, as the situation in Nehemiah’s day makes clear (Nehemiah 5).  While some argue that it may have been proper for Jews to charge interest on business loans, given Jesus’ comment on interest in the parable of the talents, it should be kept in mind that Jesus did not endorse every detail of His parables (e.g. Luke 16:1ff), nor does He or anyone else in the Bible teach explicitly about debt in any other context than poverty.  As Randy Alcorn has observed, the Bible gives not one favorable word about debt, but assumes that debt is the last resort, entered only when one faces abject poverty.  Therefore, the test of genuine charity in lending was whether the creditor lent interest-free.  This was a mark of the upright man (Psalm 15:5; cf. Ezekiel 18:8, 13, 17).

In all these commands, the Jews were to fear God (Leviticus 25:36; cf. Nehemiah 5:9).  He stands above all governments as the final Judge.  If the Jews abused the poor man, God would still hear his cry, for, as He assured them, “I am gracious” (Exodus 22:17).  Moreover, in His providence, the man who “oppresses the poor to increase his riches…shall surely come to want,” for in reality he is gathering these riches “for him that will pity the poor” (Proverbs 22:16; 28:8).  Both governments and people alike cannot afford to miss this fact: “The LORD executes righteousness and justice for all that are oppressed” (Psalm 103:6).

This confluence of poverty, debt, and interest forms an interesting backdrop for the current situation in America.  From what I have been told, American mortgages used to be limited by the seven-year rule of Deuteronomy.  According to the Federal Housing Administration (FHA), most loans before the Great Depression lasted from three to five years, and required at least fifty percent in down-payment and a balloon payment at the end.  As a result, only one in ten Americans owned a home, in contrast to the recent peak of over two-thirds in 2001.  Two events in the 1930s brought a radical change to the way both Americans and the government regarded debt and interest.

First, in the heat of the Great Depression, the United States went off the gold standard.  Of all Franklin Roosevelt’s legislation, historian Samuel Eliot Morison called this step “the most revolutionary act of the New Deal, since it broke the implicit contract between government and public to the effect that all government bonds, and bills from $20 up, were to be paid in ‘gold coin.’”  In other words, the dollar bill you hold, which is technically a “federal reserve note” that is “legal tender for all debts, public and private” (see the fine print), is not backed by anything constant.  If the government wants to print twice as much as is currently in circulation, your buying power would eventually be cut in half.  This devaluation of the dollar is a form of robbery, and a breach of good faith.  Moreover, as a result of this new “freedom,” the government entered into debt full-steam.  Although some economists warned that the United States could not sustain a 100-billion-dollar debt, by the end of Roosevelt’s presidency, the debt had soared past 250 billion dollars, and continues to climb today.

Second, the rules regarding mortgages changed.  In an effort to boost housing sales, the government created the FHA in 1934–a government agency that issued thirty-year fixed-rate mortgages.  This change of custom opened the door for many Americans to enter into debt, because the mortgage payments were dramatically reduced, due to the debt being spread out over a longer period of time.  In order for the FHA to have more money to lend, the government in 1938 created the Federal National Mortgage Association, otherwise known as “Fannie Mae,” to borrow from the American people in order for the FHA to lend to the American people.  To further augment the supply of money to lend, in 1954 the government next allowed banks to lend mortgage money, and in 1970 created another federal lending corporation, nicknamed “Freddie Mac.”  In all of this, fractional reserve banking also increases the money supply, and thereby reduces your buying power through inflation.

While it might be easy to criticize the New Deal from today’s vantage point, in fairness, we must recognize that times were tough, the economic conditions had changed radically in a couple generations, and warnings about the speculative habits of the 1920s had gone largely unheeded.  In other words, while I myself do not agree with principles of the New Deal, I grant that the situation was difficult.  Moreover, I also recognize that I myself have never gone through such dire times, nor do I want to, and that I have been the beneficiary of the prosperity that has resulted from this bad habit of American credit.  As in most cases of borrowing, this pool of debt created initial prosperity.  Only now, as seen in the recent housing crisis of 2008, is America beginning to feel the weight of debt that must be paid.  What does the future hold? The next essay will address this question from a biblical perspective.

Sources: Randy Alcorn, Money, Possessions, and Eternity, rev. ed (Wheaton, IL: Tyndale House, 1989, 2003), 305-26; David Chilton, Productive Christians in an Age of Guilt-Manipulators: A Biblical Response to Ronald J. Sider, 2nd ed. (Tyler, TX: The Institute for Christian Economics, 1981, 1982), 206-09; Lawrence Kadish, “Taking the National Debt Seriously,” Wall Street Journal (online), 11 October 2009; Samuel Eliot Morison, The Oxford History of the American People (New York: Oxford University Press, 1965), 955); “Mortgage Debt Outstanding,” Board of Governors of the Federal Reserve System; “The Federal Housing Administration (FHA),” U. S. Department of Housing and Urban Development; “Consumer Credit,” Federal Reserve Statistical Release; Gareth Marples, “The History of Home Mortgages–A ‘Dead Pledge’” (; see also “The Federal National Mortgage Association Charter Act (1954)” (

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