7/27/11

A Question for the Raise the Debt Ceiling Folks

Just to get it out of the way, let me note that I think of course they're going to raise the debt ceiling. Whether all the wrangling is scripted or not, our elected representatives want everyone to see how hard they are working.

In the end, whether Congress passes a bill and Obama signs it or if the President invokes a clause in the 14th Amendment (which had to do with Civil War debt and nothing to do with the President being able to borrow--remember that Congress has the power of the purse and this power is one of Congress' most important tools in checking and balancing the power of the President), we'll end up with the worst possible law, as always. That's just how the government works.

Now to my question for everyone who says that we must raise the debt ceiling. Senator Al Franken, of Saturday Night Live fame (I think the funniest moment of his career was when people actually voted for him), has listed what the government can and can't pay if the debt ceiling isn't raised.


Franken Floor Charts

As you can see, the government can afford its interest payments. I don't think, therefore, that it's appropriate to call it a default. Yeah, we won't have enough money to pay for all that other stuff (a lot of which is a total waste of money, in my opinion) apart from debt interest, Social Security, Medicare, and unemployment benefits. There are many who argue that we should get rid of these programs. Rather than agreeing or disagreeing with this sentiment, I just want to note that most of the recipients of these funds have paid into the system. Since they paid, they deserve their money back. Anything above that can be cut.*

My question is, what happens after the debt ceiling is raised? As soon as the government has that money, they're going to put it in their pockets and the pockets of their cronies. Whatever is left over will go to useless programs.

All of the new borrowed money will be spent. That is a guarantee. In a couple of years we'll be back to the same place. We'll again be faced with the choice of raising the debt ceiling or not being able to pay for things.

At that time, tax revenues will probably be the same. Maybe they'll be lower if the economy gets worse, but it's unlikely that they will be much higher. The reason for this is that
Unemployment has remained above 9% for 21 straight months, and economists and policymakers, including Fed Chairman Ben Bernanke, have repeatedly said it's likely to remain high through the next several years.  (CNN)
Unless there's some new invention that revitalizes our economy like the internet did in the 1990s, it's unlikely that the economic picture will improve. The government can raise taxes, of course, but that doesn't necessarily translate into higher revenues. Instead of starting a business or investing here people will choose to do so elsewhere. (And if the government institutes capital controls to prevent this, that will be the last nail in the coffin.)

So, while the money coming into the treasury will either stay the same or diminish, the money going out will increase. The interest on the government's debt will be higher, for example, because we will have borrowed more money.

So, Al Franken and everyone else who wants to raise the debt ceiling, aren't you just postponing the inevitable? We cannot raise the debt ceiling indefinitely. You know that, right?

The Republicans and Democrats are talking about cutting the deficit, but when has any one of these bozos ever saved us money? Remember a few months ago when members of Congress showed us how hard they worked to cut $38 billion, which was a laughable 1% of the budget? It turns out that the real savings was $352 million, less than 1% of the purported savings!

And the congressmen and senators are working hard right now! They talk about trillions in cuts. How much will those cuts really amount to? They're all based on projections of how fast the economy will grow and a number of other factors that they're just making up. They're not cutting anything.

After the debt ceiling is raised and we're back in a similar but worse position in a couple of years, what are we going to do then?

*Budget idea off the top of my head: Pay interest on the debt, Social Security, Medicare, and unemployment insurance. Pay federal workers, but make massive cuts to the federal workforce. (I know a number of people who work for the government and they watch Youtube all day. It's partly due to laziness but mostly due to the fact that they have no work to do.) Pay our veterans. Pay our soldiers, but stop all our wars and close down most of our foreign bases. Cut everything else. If you're worried about the Pentagon, it has plenty of money. If it wants to pay defense contractors for fancy new gizmos, it should be able to find billions in its couch cushions. Think about how much smaller our budget would be (or how many more programs we could fund or how much less our taxes could be) if there were even half as much theft going on as there is now.