It has been bantered about, mostly by academics, that a debt ceiling is really an arbitrary construct since it gets ignored and raised whenever we reach it, it could just as easily be discontinued. This short sighted opinion evidently proceeds from those who think there are humans willing to ignore the reality of the necessity for a debt ceiling. Why is a debt ceiling necessary? It is the only vehicle in existence to bring attention to the politicians that their spending cannot continue beyond a certain limit. This limit is not some arbitrary construct that can be defined by some “Super” legislative mob, but is grounded in fiscal reality.
When anyone spends money, they rely on a source of income to provide funds for the expenditures. People who spend their own money know what they earn and what they can expect in revenue. People who spend other people’s money in the political arena have the notion that revenues are not limiting because they can always tax more or borrow more or even print more. You wouldn’t think a body of people would be so naive as to agree with this fraud but the evidence is overwhelming that this is indeed the case. If there were no debt ceiling established and enforced, the reality of the politicians’ methods would suddenly and mercilessly pounce on a nation with unforgiving consequences. The sad fact is the United States is approaching this abyss with a cavalier attitude by most politicians that “we can still get away with it.” They have taken quite literally the admonition of Maynard Keynes,”that in the long run we will all be dead”. He and his followers neglect to say,”but our offspring won’t be.”
Imagine for a moment the debt ceiling was no longer a consideration. Does anyone seriously think the taxpayers could be scalped to the extent they would have nothing to live on? How many historical rebellions does it take for a politician to realize this is the result of all attempts to tax, borrow,spend and print by governments. The fact that the United States has lasted longer and been more prosperous than any other nation in history can be attributed to the Constitution that limited our government until it was corrupted and infiltrated with misinterpretations and back door distortions. I don’t need to list the many times throughout history that demonstrate the folly of government overspending and the attempts to cover the debt with printing,borrowing and taxation. All national downfalls can be traced to attempts to pander politically through the public purse.
What happens when the amount of money necessary for running the government goes beyond what taxation and borrowing can provide? The only thing left is debasement of the currency by printing paper money that eventually becomes worthless. When people see on their money there is a promise to pay from a government that is on shaky financial standings then the conclusion must be the money is no good. People turn to a currency that doesn’t instantly depreciate under a flood of hyperinflation and seek an alternative that is universal such as gold that is a convenient storage of value and retains value. Meanwhile the government attempts to do what it always does when it ignores reality and either confiscates gold or forbids its ownership. This doesn’t reduce its debt or give its citizens a stable economy but it is the last act of desperation a government can come up with. This is usually the last straw for a citizenry who must rebel to survive. Again history is replete with examples of the phenomena that begins with a government spending beyond its means.
What can a government do when it has taxed its citizenry to the extent they can no longer save, invest, buy necessities or live? That government can borrow until its lenders no longer have confidence in the government’s ability to pay back the loans. This loss of confidence begins when the printing presses crank up and the value of the currency drops to the extent the lenders are not getting paid back in money that has the same value as it had when the lenders provided it to the government. This is predictable and absolutely certain. The ensuing rioting and deprivation which we are seeing in Europe is an example of what we in America will also see. Can it be prevented? Not with the current crop of people in elected offices or those who want to be elected.
We hear talk of growing the economy to resolve this oncoming crisis but that is a pipe dream. An economy doesn’t have a chance of growing when parasitical politicians denounce profit making which is the generator of a need for labor and jobs. Does anyone realize how hard it is to start or run a business with the license fees, the taxes, the restrictions and inspections, the outlandish fines for noncompliance and the expense of financing IRS audits? Any businessperson who tries to start a business is faced with a permit requirement, requirements for construction and expenses for employees that makes the notion of profit practically nonexistent. Meanwhile the politicians blabber about how their priority is jobs. Without a reverence for the profit motive and a recognition that it must be endorsed and not interfered with, there will be no jobs. Nobody hires without an incentive. Why would anyone hire a person if they thought it would cost them more than the person could produce? Only those hiring for the government can ignore this reality.
The days of government spending willy-nilly are limited regardless of whether the government decides to continue raising the debt ceiling. The reality of the interest payments on borrowed money reaching heights that will consume the entire “budget” of the U.S. government cannot be averted. Debt has a way of being so absolute that even the most prolific spending must eventually cease. When you can no longer borrow that method of revenue disappears. All that is left is taxation and/or printing ( counterfeiting). When half of the population doesn’t pay any taxes and those who are generating jobs and capital are told to pick up the slack so the politicians can continue their ride to financial oblivion the end is almost upon us. The printing press is the only option left and that is the sure road to hyperinflation, chaos and violence. It is being played out in the Middle East and in Europe and will soon hit the United States. A debt ceiling restriction is the way to stop this approaching crisis but its importance is being downplayed because politicians think they live in a world where imagination can be translated into the possible. This philosophical error has produced statements like, “ Others ask why, I ask why not.”( Bobby Kennedy).
Imagining the debt ceiling is just some artificial construct is avoiding the issue of the consequences of interest consumption of the budget. It is ignoring that government spending cannot continue indefinitely. It is a warning that the point of no return will come up and it will be too late to remedy this error. An unlimited debt ceiling like the misnomer that government cannot operate without taxation has placed us as a nation in the predicament of a deteriorating status for the first time in our history. A simple rethinking of these ideas could right the ship of state for a long and prosperous future. The politicians of today are incapable of making this transition in their thinking.