Not Increase the Debt Ceiling
by Jeffrey L. Scribner
while Rome burned. The President and the Congress are playing political
games while the national debt grows to out of control proportions.
We should hold the government’s feet to the fire and force an end
to spending using borrowed money. An opportunity to do this will
arise in a month or so.
In April, almost
seven months after the start of the fiscal year, Congress finally
passed the FY 2011 Federal Budget, nominally $38 Billion (about
one percent) less than the proposal by the President. Two things
are significant here. The first is that this is the first budget
for FY 2011. Congress has spent money from the beginning of FY 2011
(01 October 2010) until mid April by "continuing resolution"
in the absence of any budget. The second important point is that
the 2011 budget, with the aforementioned $38 Billion reduction,
spends more money than was spent in 2010. It is still in deficit.
It has been adding to the national debt all year through continuing
resolution and will continue to add to the debt for the rest of
the year via the budget that was finally passed.
The House of
Representatives has also passed a "Budget Blueprint" prepared
by Congressman Paul Ryan, Chairman of the House Budget Committee.
If all spending and receipts outlined in this document are implemented
by the House and Senate and are then signed by the president, spending
will be reduced by about six trillion dollars and the deficit will
be reduced by about four trillion dollars over ten years. Do you
really believe that this will happen? Even if it does, the Federal
Government will continue to run deficits and add to the national
debt for the next ten years, albeit at a slower rate than the present.
What does this
tell you about the difficulty in reining in the runaway spending
that has become the habit of Congress? It tells me that something
a lot more drastic has to be done to get a grip on Federal spending
and to stop adding to the debt immediately.
It so happens
that there are just about enough votes in the current House of Representatives
to prevent an increase in the debt ceiling. If the debt ceiling
is not increased, there will be bigger spending cuts in the 2011
budget and the 2012 budget and every budget after that because we
are very close to the debt ceiling. If the debt ceiling is not increased,
money cannot be spent that would raise the debt over that ceiling.
Deficit spending would end immediately. Congress will be finally
forced, at least for a little while, to allocate austerity rather
than funding their favorite expenditure with borrowed money.
could then decide whether to re-elect those who voted to increase
the debt ceiling or those who tried to be responsible and voted
not to. Some people are saying that failure to raise the debt ceiling
will cause a catastrophe. If that happens, the voters can consider
it. What if there is no catastrophe just a lot less spending? The
voters can consider that, too. Some big spenders are claiming that
failure to increase the debt ceiling will cause a recession. We
have managed to get into a recession and sustain it while adding
to the debt every minute. Deficit spending has not prevented a recession.
Moreover, there is reason to believe that not extending the debt
limit will actually be good for the economy. Government spending
will be curtailed. Some government services will also be curtailed.
This provides fertile ground for more free enterprise solutions,
more little companies, more employment in the private sector and
more GDP growth. Why should we believe those who say increase the
debt ceiling or suffer a recession?
Using the FY
2010 numbers above we can see that in order not to create more debt,
Congress would have to hold spending, including debt service, to
$2,162 Billion. Congress would have to cut $1,294 Billion from FY
2010 spending levels to do that. Where would you cut?
We can fund
Social Security and Defense without borrowing. However, the first
call on available funds would have to be servicing the current debt.
We might have to change Medicare and Medicaid along the lines suggested
by Paul Ryan and we would have to be very careful about everything
else. Wouldn’t this be a good thing? Just think, after a few years,
Congress might actually start to think about surplus budgets to
pay down debt and gain spending flexibility from lower debt service
Congress will never cut spending enough to balance the budget, it
is necessary to force that action via refusal to increase the debt
limit. There is no time like the present to do this.
Scribner [send him
mail] is President of ASI
Enterprises, Inc., an investment bank serving small and medium
© 2011 by LewRockwell.com. Permission to reprint in whole or in
part is gladly granted, provided full credit is given.