An alternative to popular faith
Sometime in October, the federal debt will touch the legal ceiling of $12.1 trillion, and Congress will decide whether or not to raise it. Surely, the debt ceiling law is among the nation’s silliest.
Visualize this: All year, you recklessly spend more than you earn, and at the end of the year you announce that you will not pay your bills because you are frugal. That’s Congress.
Congress authorizes federal spending and federal taxing. So Congress already has control over the federal debt. It is Congress that has created the $12 trillion debt. Now, Congress will decide whether to pay for what Congress has authorized.
If Congress doesn’t increase the debt, several bad things could happen. The U.S. could default on its debts, thereby removing forever the trust other nations and our own citizens have in our money. Borrowing would become much more difficult and the world would begin to dump its T-securities – a financial calamity. Would Congress be that stupid? Well, it’s Congress.
Or, the recovery from this recession could end, and we could plunge into a depression of unprecedented magnitude. Would Congress be that stupid? Well, it’s Congress.
Or, the Treasury could implement some accounting tricks like redeeming government employee retirement funds, now invested in T-securities. Or the Treasury could stop paying interest on government trust funds. Both actions are internal devices without substance, merely delaying the inevitable, as does the vote on the debt ceiling.
No responsible person, who cares about America, would vote against raising the debt ceiling, but we’re talking about Congress, a group that often embraces style over substance. The debt ceiling has two results. First, it is a shameful admission by members of Congress they know or care little about the bills they vote for, and focus on the individual, pork-barrel amendments they can sneak in. Generally, Congress is a “You-vote-for-mine-and-I’ll-vote-for-yours” club.
Second, the debt ceiling gives members of Congress political cover — the ability to vote for spending for their constituencies, while voting against spending as a whole, thus to demonstrate how frugal and disciplined they are.
There should not be a debt ceiling. If Congress wishes to be frugal, it should do so when authorizing, not when paying, its debts. Any Congressperson who speaks against raising the debt ceiling is a phony. Or is that statement a tautology?
Oh, and by the way. Limiting the creation of debt limits economic growth, but that is a subject discussed in many posts on this blog.
Rodger Malcolm Mitchell
For more information, see http://www.rodgermitchell.com