I wrote very little about the debt ceiling leading up to the debt ceiling “deal” that just recently happened. I think the only time I mentioned it was when writing about yields on short-term U.S. Treasury bills.

On April 25, 2013, I wrote: “I have little doubt that the Republicans in Congress will allow the debt ceiling to be raised. Sure, there will be much political theater, and maybe there will be some concessions to have the appearance of some fiscal sanity, but I highly doubt either party will allow for an outright default at this stage of the game.”

I spent little time writing about the debt ceiling drama because the outcome was so utterly predictable. It always happens this way. There is always a “deal” in the end. It is a deal for the state planners. It isn’t a deal for the American people, and this time was no different.

Thomas Massie Supports Debt Ceiling Deal

It was surprising that my two favorite people in Congress supported this whole fiasco. Marjorie Taylor Greene (MTG) went along with the debt ceiling deal. She is typically courageous, outspoken, and mostly good on the issues. But she’s still a conservative and not a libertarian, so I am not completely surprised by this.

I was more surprised about Thomas Massie, who is the most libertarian member of Congress. It was Massie who held up the trillions of dollars in COVID emergency spending in 2020. That is what led Trump to denounce Massie and say that the Republicans should kick him out.

Massie and MTG both supported Kevin McCarthy for Speaker of the House when there was that drama. They at least supported him in the sense of voting for him. I understood this for strategic reasons. They were gaining more power (in a good way) over committees and saw that they would get some valid investigations.

McCarthy did have a hand in releasing January 6th footage to Tucker Carlson, so McCarthy hasn’t been all bad up to this point. Even if he did it for purely political reasons, you can understand why MTG and Massie would take this outcome.

But on the debt ceiling deal, I really don’t understand. Massie has tried to explain that the deal isn’t anything great, but it is about as good as we can hope for because it may force slight cuts in spending.

His reasoning wasn’t strong for me. I think he got it wrong on this one. I am not willing to completely discount him from now on because of this one action, but it is a strike against him in my book.

It just shows that there is no Ron Paul in Congress.

If You’re Going to Compromise…

It isn’t always easy to decide how to vote in Congress if you are truly trying to gain greater liberty for the people. Do you vote for something that is unconstitutional if it moves you in the right direction? If you can get a 50% cut in funding of the Department of Education, should you support it even though it is still funding an unconstitutional department?

I don’t know if there is anything unconstitutional about this debt ceiling deal. I don’t think it actually approves any spending, but I could be wrong on that point. It allows the U.S. Treasury to issue more debt.

Anyway, I would have voted against this thing even if I thought it would lead to a little reduced spending. One of the reasons is that the recent baseline is ridiculous. The spending next year will still be over $1 trillion more than it was in 2019.

Spending absolutely exploded in 2020 and 2021 with the excuse of COVID lockdowns – which the federal government recommended and state and local governments implemented. So it is a bit of a joke to say you can cut spending by 1% or so from last year after it had gone up so much before that.

Imagine a family that makes $60,000 a year in income. The family is spending $70,000 per year and racking up credit card debt to the tune of $10,000 per year. The next year, the family has an emergency and has to spend $90,000 that year. Then the emergency ends.

The next year, the husband/ father presents a budget to his wife. He says they are only going to spend $85,000 this coming year. He is cutting the budget by $5,000 from the previous year.

Would you call that fiscal sanity?

The Unlimited Debt Ceiling

It seems that the debt ceiling is basically unlimited at this point. Actually, with this “deal”, it is unlimited until 2025.

The other joke in all of this is that there is nothing binding on future spending. It is easy for Congress to override any promises made in this bill. They can always push it off to the next session of Congress.

If any true fiscal conservative is going to agree to anything, it should be for significant spending cuts right here and now. It shouldn’t be about what Congress will spend 2 years from now or 10 years from now. That never happens.

The government is still collecting something around $4.7 trillion per year from taxes. So even if the debt ceiling weren’t raised, it can still pay interest on the debt and fund the so-called entitlement programs. But they have an empire to run around the world, and they have to make sure that the war in Ukraine keeps going.

So they’ll threaten grandma that the Social Security checks may not come if there isn’t a debt ceiling deal, but they won’t threaten an end to funding the oligarchs in Ukraine.

If someone in Congress wanted to avoid drastic and sudden spending cuts while also moving towards more fiscal responsibility, they could at least propose something like raising the debt ceiling by $50 billion per month. After one year, it could go to increasing by $40 billion per month.

If this trajectory held, then you would eventually get to a balanced budget.

To start off by raising it by $50 billion per month, that would be $600 billion per year. So Congress would actually have to cut spending because the annual deficits are way beyond that mark at this point. But we can’t even take that modest step.

Future Generations and Current Generations

There is one last point I have about the overall national debt that is widely misunderstood.

We often hear that future generations will pay for this. And that is correct. Of course, they could choose to default, but they are still paying for it in the sense of less compounding growth.

But let’s be real clear that increasing the debt hurts us right here and right now. We are taking productive capital and handing it over to the government to spend. Perhaps more accurately, we are handing it over to government to waste and misallocate.

We are getting poorer right now than we otherwise would have been because of the increasing debt. A decrease in government spending might hurt some specific individuals who benefit from it, but society as a whole would be wealthier if the government spent less. That capital could be used for productive purposes to make consumer goods and services cheaper.

It is actually amazing how much people are still able to flourish in an environment where the national government alone is consuming over $6 trillion per year. Just imagine how much wealthier we would be if that number were cut in half.