What Debt Ceiling?

“Why have a national debt ceiling if it doesn’t really put a ceiling on the national debt?” Thomas Sowell

Since the debt ceiling was created via the Second Liberty Bond Act of 1917, Congress has raised it about a hundred times. To better appreciate Sowell’s quote above consider the fact that in 1980 the federal debt stood at $908 billion, an increase of $537 billion since 1970; in 1990 the debt reached $3.2 trillion, in 2000 $5.6T, in 2010 $13.5T, and in 2020 $27.7T. The US national debt currently stands at $31.4T; compare that to the GDP of the US at $23.3T. In summary, the US is now at a point where its total economic output is about $8T less than its debt, and that is federal only, not counting state and local governments, corporate or private debt.

The rate of increase in the debt has not been linear; if graphed, which you can readily find online, it is exponential, such that by the end of this decade the interest alone on the national debt will exceed the total of federal tax revenues. While we hear much about the SSA trust fund going broke, just think about the fact that a virtual bankruptcy of the US Treasury looms even sooner. In this context, the spending cuts that the House is seeking, while long term insufficient to meaningfully address this debt crisis, is at least a hopeful start, but even with an eventual and inevitable deal being made the debt ceiling will still rise again.

The debt dilemma is not the creation of any one party, but both of our national political machines.  When Trump was given a brief on America’s growing debt crisis in 2017 and its impact on the future of the country, he callously responding that “Yeah, but I won’t be here.” Debt apparently is an addiction that transcends partisan principles, contradicting the belief that the GOP is more fiscally responsible than the Democrats; it’s only a question of degree, and it inevitably leads to the same outcome.

It’s not that politicians don’t recognize the problem; consider what Barack Obama said during the debt ceiling crisis in his administration that “There’s no doubt that we’re going to have to address the long-term quandary of a government that routinely and extravagantly spends more than it takes in. Without action, the accumulated weight of ever-increasing debt will hobble our economy, it will cloud our future, and it will saddle every child in America with an intolerable burden.” The problem and the consequences of ignoring it are well known, but little has been done about it.

So desperate is the current administration in its non-negotiable position that it entertains bypassing Congress all together with a dubious play on the 14^th Amendment. This post-Civil War amendment was enacted to assure equal protection under the law, but also included provisions to assure paying off the federal debt resulting from financing the Union’s war effort; invoking this as a way to bypass Article 1 of the Constitution, which reserves such powers to Congress alone, illustrates both the ignorance and cynical nature of our national politics.

While this debt ceiling crisis occurs during a time of so many other crises, all of which are self-inflicted, we should not be distracted from the root cause of the problem, which is the fraud at the heart of our contemporary financial system; it is the fraud of debt-based money, and the dire consequences that result if we refuse to change the way our money works. The US dollar is a fiat currency, meaning it is not commodity money so it has no intrinsic value; it has value only as long as people “trust” that it will be accepted by others as a unit of account and a medium of exchange. The moment that trust is questioned, such as in the case of a default, the US dollar’s value will fall drastically, even more than it already has. If we think that inflation has become entrenched now, imagine what it would be like with a default.

We always hear about some politicians justifying some draconian proposal as an issue of national security, when in fact it just another partisan power grab. Why don’t we hear more about the debt crisis as an issue of national security? How can the economic wellbeing of Americans be any less an issue of national security than TikTok, misinformation or Ukrainian Sovereignty? While the field of presidential candidates grows daily, who among them will make debt and budget reform a cornerstone of their platform? Many choose some culture war issue, or increased entitlements to harvest votes, but who has the courage to tell the American people that the debt party will end if they are elected, and that they will push for a balanced budget, and not the same old political game that will Rogers so wittingly described when he said “The budget is like a mythical bean bag. Congress votes mythical beans into it, then reaches in and tries to pull real ones out.”