July 25, 2011 Update on the Debt Ceiling

The issue of the debt ceiling is still the top national news.  August 2 is supposedly the date that the ceiling has to be raised or else all chaos breaks loose.  In actuality, the chaos would be happening mostly in DC where the politicians would actually have to drastically cut federal spending.  This is why we are not likely to see this happen.

There are rumors of all kinds of different plans being worked up.  It is hard to know what is true and what isn’t.  As we get closer to August 2 with no deal, there is reason for slight optimism (from a libertarian point of view).  However, I am not naive.  Most of these politicians want the debt ceiling raised.  Right now, they are posturing for their constituents.  Republicans know that they will be in trouble with the voters if they allow tax increases.  Democrats know that they will be in trouble if they don’t demagogue the issue and play class warfare.

For all we know, there may already be a back room deal that is worked up.  Again, it is hard to tell who is telling the truth.

If the Republicans in DC actually wanted to cut spending, there would be no debate at this point.  They don’t have to do anything.  They can just do nothing and the debt ceiling won’t be raised.  Then the spending cuts would have to come unless Obama tried to declare himself dictator.  Instead, the Republicans are pushing for the phony balanced budget amendment.  Amendments to the Constitution are very difficult to get passed and it would take years.  If the Republicans really want a balanced budget, they just have to not raise the debt ceiling (do nothing) and the budget would be balanced.

Even if Republicans argued that they want a balanced budget in the future, but it would be too difficult to do it all at once now, they could still cut spending by just raising the debt ceiling a very small amount each month.  They could agree to raise the ceiling by $50 billion each month for the next year.  This would be $600 billion for the year.  This would force a cut of almost $1 trillion.  Why don’t they do that?

I am not in favor of the debt ceiling being raised at all, but I used the above example just to show how easy it would be for the Republican majority in the House to cut spending.  They can pick any amount they want and raise the ceiling by the difference with the projected deficit.

The problem here, for anyone facing reality, is that the Republicans just aren’t that interested in substantial cuts.  They will say they are to appease their constituents, but words don’t mean much, especially when coming from politicians.

Approximately two-thirds of the federal budget is made up of military, Social Security, Medicare, and Medicaid.  These are the sacred cows.  Politicians don’t want to touch them.  If none of these are touched, it is impossible to balance the budget, even if all other spending were completely eliminated.  This just shows how far off things are.

The Tea Party agrees on their dislike of Obama and Obamacare.  They generally agree that taxes should not go any higher.  Beyond that, there is not much agreement.  As a group, they are not demanding specific cuts in spending.

Only two things will cause a dramatic cut in federal spending.  It will either be the laws of economics or angry voters.  There are some angry voters, but most of them are not calling for significant cuts.  About half of the American people say they don’t want the debt ceiling raised.  But a majority of this group do not understand the consequences.  This would mean drastic cuts in just about everything.  This is what I favor, but there is only a small minority who really want to see an end to all of the unconstitutional federal programs.  Until these demands come, or until the government officially goes broke or destroys the currency, then the debt ceiling will get raised.

One thought on “July 25, 2011 Update on the Debt Ceiling”

  1. In trying to puzzle out the meaning and relevance of the obscure provision identified by President Clinton in the 14th Amendment, noted in the New York Times: Some see way out of debt impasse, found on page A7 of the Boston Globe, July 25, 2011 is simple.
    The provision, “The validity of the public debt of the United States, authorized by law, including debts incurred for payments or pensions and bounties for services in suppressing insurrection or rebellion shall not be questioned”, is quite easy for me to understand. Some law professors, economists and reporters can’t figure it out because it’s a paradox. Debt IS Money. Without the current debt there would be no money. Money is anything the government declares is money. Money declared by the government is called fiat money. Sovereign Nations are supposed to have as it main focus, the control of the expansion and contraction of that declared money, fiat money, for the ease and convenience of trading goods and services for the people of that nation. It should be issued interest and debt free. Every sovereign nation’s debt limit is unlimited or rather limited to the full faith and credit of its people, which in the long-term is unlimited but limited in the present. Without that paradoxical understanding, the current bantering is for favorable positioning of either the Democratic or Republican Party and has nothing to do with the debt. It also makes for and high anxiety. Enjoy the mindset change!

    David Snieckus
    99 Crescent street
    Newton, MA 02466

    This is good: Workings of a Public Money System: http://www.monetary.org/yamaguchipaper.pdf


    For Immediate Release:
    Contact: Nathan White (202)225-5871
    Kucinich Briefing on Eliminating the Debt and Creating Jobs without Raising Taxes
    Congressional Briefing: Tuesday, July 26, 2011 at 11:30 AM
    WASHINGTON, D.C. (July 20, 2011) — Congressman Dennis Kucinich (D-OH) will sponsor a Congressional briefing by Professor Kaoru Yamaguchi, PhD. Dr. Yamaguchi will present the results of his breakthrough macroeconomic analysis demonstrating how Congress can solve the debt crisis while promoting the economy to run at its full potential – without inflation.

    Date: Tuesday, July 26, 2011
    Time: 11:30 AM ET
    Location: Cannon 402
    Professor Yamaguchi, who now teaches at the prestigious Doshisha University in Kyoto, Japan, will lead a discussion about the means for Congress to:
    • Pay off the national debt – in full.
    • Provide the funding needed to rebuild America’s crumbling infrastructure – creating millions of good jobs in the process.
    • Reduce or even eliminate federal deficits and solve the fiscal problems of State and local governments.
    • Make the U.S. dollar a stable currency which maintains purchasing power over time.
    • Without creating inflation
    And the pdf here



    David Snieckus

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