Jeff Nadel | Debt, default and deadbeats
Give Me Liberty | Politicians are recklessly spending your money and lying so they can spend more of your children’s
January 24, 2013, 11:51 pm·
Give Me Liberty
The big secret in Washington — the secret that members of both parties are guarding with the full weight of their political clout — is that failing to raise the debt ceiling is not tantamount to the U.S. defaulting on its debt.
At his recent press conference, President Obama told the American people in no uncertain terms that should Congress fail to raise the debt ceiling, America would become “a deadbeat nation.”
Let me be clear: we must refuse to raise the debt ceiling by the statutory deadline.
Michael Tanner, a senior fellow at the Cato Institute, disagrees with the president’s assessment. He told me in a phone interview that approximately 28 percent of federal spending is borrowed. Understood differently, 72 percent of federal expenditures are funded directly by revenues.
If the debt ceiling is not raised on time, it is true that an immediate, 28-percent spending cut would be required. Tanner admonishes us to bear in mind, however, that we “could pay interest on the debt, Social Security, Medicare, salaries for the military and [we would] have about $70 billion left over…”
As long as we pay the interest on the debt, we do not default. Federal revenues amount to $277 billion per month, while interest payments cost just $38.1 billion.
Obama says we risk becoming a deadbeat nation. I say we already are one.
Though we have technically paid our bills on time, that wonder of accounting hardly allows us to evade the “deadbeat” epithet. The United States now lives on the projected prosperity of its children — our generation and those who come after us.
Sure, the federal government has accomplished the Herculean task — just listen to their self-congratulation — of writing checks to bondholders, Social-Security recipients and others. All the while, we have been accumulating more and more debt.
A deadbeat nation is one with a government that spends more than its revenues with wanton disregard, legislators who are blissfully ignorant of the true consequences of their profligate spending and putative statesmen willing to offload the costs of government’s obligations onto the nation’s unwitting and unwilling children.
Failing to raise the debt limit would not, as many politicians would have us believe, be an end-of-the-world scenario.
It may, on the contrary, be our only hope. Missing the deadline is virtually the only course of action that will force spending reform.
It is true that the market will react unfavorably in the short term. There will be uncertainty and inconvenience. It would be terribly shortsighted, though, to overlook the fact that, even though cuts “would be painful,” as Tanner admits, “it would be equally painful to raise [the debt ceiling] and get nothing [in the way of spending reform].”
This spending problem and the consequent $16 trillion national debt have been the fault of Democrats and Republicans alike. It is the product of a culture of increasingly unfettered government.
Why cause the pain? Why go through the trouble of instantaneous spending cuts? Because we have no choice.
The pain will ultimately happen. We cannot continue on this path indefinitely. The consequences of excessive spending, cheap money created by the Fed and an unshackled federal government will materialize in the form of heretofore unimaginable economic catastrophe.
Congress has missed the deadline for months at a time before, including in 1985, 1995-1996 and 2002. Neither the Capitol Building nor the New York Stock Exchange came tumbling down.
We must reject the delay — and resultant multiplication — of our problems. Postponing them is no longer a viable option. If we wait longer, more people will suffer.
There are those who worry that failing to raise the government’s credit limit will hurt the country’s credit rating. However, Tanner highlights that Fitch, one of the big-three ratings agencies, said it would downgrade United States’ debt if Congress cannot devise a credible debt-reduction plan.
The debt ceiling will ultimately be raised, but we would be grossly negligent not to use this opportunity to force upon Congress a responsibility it has aggressively shirked — fiscal discipline.
This is a country so much greater than the mistakes and pettiness of our politicians. We ought not let ourselves be defined by their deception, their ineptitude and their recklessness.
Jeffrey Nadel is a College sophomore from Boca Raton, Fla. His email address is email@example.com. Follow him @theseends. “Give Me Liberty” appears every other Friday.