PRELIMINARY NOTE: We have another great webinar this week with Sheldon Richman, who continues his analysis of the market process. In order to get our nation back on the right track with respect to economic liberty, two things are necessary: A deep desire for a free society and a deep understanding of how the free market operates. Once a critical mass of people in society decides they want to be free and understand the processes by which the free market brings harmony, prosperity, and mutual cooperation, the restoration of a free society inevitably becomes closer. There are few people better at explaining this than FFF’s vice president, Sheldon Richman. Educate yourself and expose your friends to the wonders and intricacies of the free-market process by attending the webinar from the privacy of your home. The webinar is FREE! It is tomorrow, Wednesday, October 16, from 7:00 to 8:00 p.m. ET. Sign up by sending an email to Bart Frazier: bfrazier@fff.org.
It’s clear that, once again, both Republicans and Democrats in Congress are going to vote to lift the debt ceiling, which means, once again, that the so-called ceiling is a sham and a fraud. A ceiling is a ceiling. It’s a limit on the amount of debt that the federal government is permitted to place on the backs of the American people. If the ceiling is going to be lifted and then lifted again and again and again, then there is no ceiling. The sky becomes the limit.
For decades the big spenders in Congress have been spending more than the amounts being collected through taxes. They have been borrowing the difference. They just keep putting more and more debt on the federal credit card, a credit card that the American people are ultimately liable for.
The debt ceiling is an acknowledgement that too much debt is a bad thing, a dangerous thing. If more debt was a good thing, which statists claim, Congress would never have announced a limit on the total amount of debt that could be accumulated. And the fact that Congress itself has imposed a limit on debt says a lot.
The fundamental problem, from a fiscal standpoint, is not difficult to understand: Federal officials insist on spending more than what they bring in.
What is the effect of this spending and borrowing binge? Consider these figures that Senator Rand Paul cited in a recent op-ed in the Washington Times:
Our deficit in 2006 was $250 billion. Sen. Obama rightly opposed raising the debt ceiling from $8.1 trillion to $8.9 trillion.
Today, our deficit has quadrupled. Our national debt is $17 trillion, nearly double what it was when Mr. Obama refused to raise the debt ceiling under George W. Bush.
So, what does lifting the debt ceiling mean? It means that the government will continue spending more than what it is bringing in with taxes. It means that it will be borrowing the difference. That borrowing will add more debt onto the government’s books.
How is government debt repaid? Through taxes — taxes that are levied on the American people. If things really get desperate, as they did in Greece, and the government needs more revenue fast, there is no telling what measures the government will take, in addition to a massive increase in income taxes. In a crisis environment, anything is possible, including the confiscation of people’s retirement accounts, as the Argentine government did to the Argentine people several years ago. Before you say that our government would never do that, don’t forget President Franklin Roosevelt’s confiscation of people’s gold during the economic crisis of the 1930s.
Did I mention who the biggest holder of federal debt instruments is? That’s China. Yes, the communist regime in China. Take my word for it: As lenders, they are going to want their money. They are going to expect the federal government to tax you and other Americans to get repaid. And they’re not going to want to be paid in inflated, debased, depreciated dollars.
Contrary to all the sky-will-fall fear-mongers, the worst thing that Congress could do is vote to raise the debt ceiling. It will do nothing to dissuade Congress from spending more than what it is bringing in. It will encourage them to continue spending and borrowing. Once the ceiling if lifted again, big spenders will do what they do every time the debt ceiling is reached and then lifted — laugh and celebrate how they have once again terrified and conned the American people into accepting more debt onto their backs.
The best thing Congress could do is to not lift the debt ceiling. That would immediately require the federal government to operate under a balanced budget. Expenditures would be limited to the amounts coming in with taxes. What’s wrong with that? What’s wrong with living within one’s means? What’s wrong with no more new debt?
Would federal officials have to make cuts? You bet they would. They’d have to cut enough expenditures to equal the overage of what they’re spending. What’s wrong with that? They’d be finally restoring a sense of fiscal responsibility to the federal government. They’d be doing what state governments do all the time — operate under a balanced budget.
Is this ideal from a libertarian standpoint? Of course not. It would still leave a lot of welfare-warfare state programs, departments, and agencies in place that have no place in a free society. But at least it would get America on the right track with respect to fiscal responsibility.