The recurring debt-ceiling circus is approaching, once again. The maximum amount of debt that the federal government is permitted to incur is about to be reached … again. That means that the federal government will not be permitted to incur any more debt … unless Congress raises the debt ceiling again, thereby permitting the federal government to continue its never-ending spending and borrowing spree.
Let’s review the basics.
The government collects its money through taxation. Once it collects the taxes, it spends the money, mainly on welfare-state functions (e.g., Social Security, Medicare, food stamps, farms subsidies, and foreign aid to dictators) and on warfare-state functions (e.g., bombings, assassinations, torture chambers, planes, tanks, bullets, snipers, and foreign aid to dictators).
Ideally, from a fiscal standpoint, the amount of expenditures equals to or is less than the amount of the tax receipts.
One big problem: for decades the federal government has been spending more than it brings in with taxes.
How does it do that? It borrows the difference.
Another big problem: Rather than spend less the next year and use the surplus of tax receipts over spending to pay off the previous year’s debt, U.S. officials continue to spend more than what the government brings in with taxes. That means more borrowing and more debt.
This goes on for decades, with the amount of government debt reaching mountainous proportions.
Finally, realizing the enormous danger associated with incurring too much debt, Congress says: Enough is enough. No more debt. Congress sets a maximum amount of debt that the federal government will be permitted to incur. That’s what the debt ceiling is — a maximum level of debt that the federal government cannot exceed.
Why did Congress do that? Look at Greece. Look at any nation whose government is incurring massive amounts of debt, year after year. At the end of this road are catastrophic financial crises and economic chaos.
Another big problem is that every time the congressionally mandated debt ceiling is reached, Congress simply raises it again … and again … and again, which then enables federal officials to continue spending and borrowing, thereby moving our nation further down the road toward the crisis and chaos that the debt ceiling was intended to avoid.
Why does Congress continue to raise the debt ceiling it has imposed? Because whenever the debt ceiling is approached, the mainstream media, which consists mainly of big spend-and-borrow statists, goes on the warpath and begins exclaiming about all the horrible things that will happen if the federal government cannot keep adding to the already enormously high level of debt that has already been incurred. The members of Congress, unable to withstand the pressure from the mainstream media, inevitably cave in and vote to raise the debt ceiling again, thereby enabling the out-of-control spending and borrowing spree to continue.
There is another important factor to consider here: Each time the debt ceiling hoopla begins and ends with a raising of the debt ceiling, everything returns to “normal.” That is, no one within the statist mainstream press proclaims, “Now that we’ve succeeded in pressuring Congress to raise the debt ceiling, the federal government now has to reduce spending to the level of tax revenues so that it doesn’t exceed the new debt ceiling that has just been established.”
I pointed this out the last time the debt ceiling was raised. I stated that as soon as the ceiling was reached, the last thing the statists would do is call for a reduction in federal spending so as to be able to comply with the mandates of the new debt ceiling.
Of course, I was right. I don’t know of one mainstream statist who was pressuring Congress to raise the debt ceiling the last time who has called for a reduction in federal spending since then. I guarantee you: These people will be at the forefront of the coming debt-ceiling circus in a few weeks, calling for another lifting of the debt ceiling. And as soon as they prevail, they will go back to life as “normal,” with federal officials continuing on their spending and borrowing binge as if nothing had happened.
In fact, many in the mainstream press honestly believe that deficit spending is the key to economic prosperity, especially in the midst of an “economic slump.” Consider, for example, these words from liberal New York Times columnist Paul Krugman from one of his recent columns:
There was and is a strong consensus among economists that a temporary period of deficit spending can help mitigate an economic slump. [Reducing federal spending would be] incredibly irresponsible at a time of crisis.
But according to Stefan Gleason in an excellent article on the website of the Sound Money Defense League, “Since 1971, the federal government has failed to run a balanced budget 91% of the time.”
Such being the case, why should there be a “crisis” that requires more deficit spending? Under Krugman’s reasoning, there should be nothing but endless and growing prosperity given all those years of deficit spending. Yet, such is clearly not the case.
At a fundamental level, the American people should be asking themselves such questions as: What is the role of government in a free society? Should it be in the charity business? Should it be in the warfare business? If Americans were to reach the same conclusions as our American ancestors (and as today’s libertarians) on those questions, the entire welfare-state and warfare-state apparatuses that have been grafted onto our original governmental structure would be dismantled. Obviously, that would significantly reduce federal spending and borrowing.
Unfortunately, however, all too many Americans remain wedding to Social Security, Medicare, farm subsidies, public housing, education grants, and other welfare-state programs. They are not about to let them go. The same holds true for the old Cold War-era warfare state. Unfortunately, all too many Americans remain wedded to the incessant bombings, shootings, and assassinations of foreigners and support of dictators, especially in the Middle East.
Regardless, at the pragmatic level there is but one solution: Leave the debt ceiling in place and enforce it by not permitting the federal government to incur any more debt. That means pay as you go. Tax revenues have to equal or exceed expenditures.
In the next few weeks, we will be treated to another debt-ceiling circus. My prediction is as follows: The Republicans will threaten to “shut down the government” by refusing to increase the debt ceiling and by refusing to approve a funding bill that entails deficit spending. Then the statists within the mainstream press will go on the warpath and exclaim that if the debt ceiling isn’t raised again, the sky will fall in. The Republicans will then to what they always do: cave in, surrender, and raise the debt ceiling and enable U.S. officials to continue their massive, out-of-control welfare-warfare state spending and borrowing.
Meanwhile, as Gleason suggests in his article, the day of reckoning gets ever closer. History has shown, and logic confirms, that a nation whose government continues incurring mountains of debt is headed toward financial and economic catastrophe.