The American Spectator : Debt Limit Fear Mongering

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Debt Limit Fear Mongering

By Ron Ross on 4.28.11 @ 6:10AM

If the limit can be raised more or less at will, why have one at all?

"The debt limit is coming! The sky is falling!" Or maybe a more apropos parable is the boy who cried wolf.

Much of what we're being told about having to increase the debt limit doesn't make sense. Here are some rather obvious questions that need to be considered regarding the debt limit:

• If you can raise the limit whenever it becomes a limit, what's the point?

• If not raising the limit would be catastrophic, is it possible to have a limit? If adhering to the limit creates havoc, is it even an option?

• How will not raising the limit result in default? Doesn't it simply mean that from that point on, your current expenditures cannot exceed your current revenue?

The limit doesn't even mean you cannot issue new bonds to replace maturing ones. It just means you can't increase the total amount of outstanding indebtedness. It does not mean that all federal government payments of any kind must stop immediately, as former treasury secretary Alice Rivlin has claimed. There might well be some explanation for the debt limit-default connection, but it is anything but obvious.

When you reach the limit, you basically have three choices -- decrease spending, raise taxes, or raise the limit. Have we already reached the point where there are zero discretionary expenditures? Are there no purchases that can be canceled or at least postponed? Are there no positions that can be eliminated or at least left unfilled?

The first federal debt limit was imposed in 1917. It has been raised an average of every fifteen months since then, including eleven times in the past fourteen years.

If the limit can be raised more or less at will, is it a complete joke? No, it's only a 90 percent joke. In the current iteration of the dance, for example, Republicans hope to use it as leverage to extract spending limitations from the Democrats.

According to H.L. Mencken, "The whole aim of practical politics is to keep the populace alarmed -- and hence clamorous to be led to safety -- by menacing it with a series of hobgoblins, all of them imaginary." Fear mongering is part of a politician's DNA, but lately it has been resorted to in unprecedented levels.

We were told in 2008 that the Troubled Asset Relief Program (TARP) had to be passed in a matter of hours or days or financial Armageddon would surely follow. In retrospect, that is very much in doubt, to put it mildly. TARP probably caused more damage than it prevented.

The stimulus package was rushed though in the first two weeks of the Obama presidency, again under the guise that we had little choice and no time to debate. We were told that passing the stimulus bill would be the only way to prevent the unemployment rate from exceeding 8 percent. The stimulus bill passed, government spending exploded, and the deficit shot up. Nevertheless, the unemployment rate went well above 8 percent and has remained there.

The stimulus has definitely not lived up to its official title -- the American Recovery and Reinvestment Act. Two and half years after it was passed, there is no "American Recovery" in sight. We are living through what is by far the longest recession in the nation's history.

Once again we're hearing the same calamitous warnings of impending disaster if we don't put aside our skepticism and just put our trust in the authorities in Washington, D.C. and on Wall Street. Have they earned our trust? What has been their track record?

There are indications that the scare tactics aren't working like they used to. A New York Times poll last week asked, "Do you favor or oppose raising the debt limit?" Only 27 percent said they were in favor versus 63 percent who were opposed. The results did not change much when the question was followed up with the possibility that a limit might increase interest rates.

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About the Author

Ron Ross Ph.D. is an economist who lives in Arcata, California. He is the author of The Unbeatable Market. Reach him at rossecon@gmail.com.

Letter to the Editor View all comments (32) | Leave a comment

Martin Owens| 4.28.11 @ 6:39AM

The plain fact of the matter is that we in the USA no longer have the ability, and for the past 50 years have had no intention, of paying back the money we stole from our posterity.

Why does the house of cards still hold together?
Because everyone realizes the run on the bank has not...quite... begun... yet. And so if I keep my mouth shut and move fast, I just might be able to jump clear of the train wreck in time.

And there is no other option any more.

Merlin| 4.28.11 @ 6:58AM

Is there anything more irresponsible than spending more money than you have year after year?

Unfortunately, yes. It is spending lots of money you don't have year after year after year.

A big THANK YOU to our best and brightest.

figusja| 4.28.11 @ 7:23AM

This is so sad. Have we gone so far as not to see common sense where ever it is. What I have to do at home to pay the bills is a budget. Why not the government? There will be pain NO MATTER what is done. Reality is knocking on the governments door to be paid its debts. We The People better be ready to pay for all of the fun we had in years past. BOHICA(Bend over here it comes again).

Intelligent Design| 4.28.11 @ 7:44AM

Obama, Geithner et. al. are totally wrong, irresponsible, and demagogic to declare that the U.S. will definitely default on its debt if the ceiling is not increased. Instead, spending on other items must be cut to provide for the interest payments. For example, there are duplicate functions in federal agencies which waste more than $200 billion a year. And we could cut hundreds of $billions by leaving Iraq and Afghanistan, cutting off all aid to the Palestinians, cutting aid to the UN, and stopping the inflow of illegal immigrants from Mexico. Illegals are consuming billions in public services, namely for education, health care, and the criminal justice system.

The nation should stop using its credit card for unnecessary and unwise expenses, and give priority to making the mortgage payments. If your congressperson votes for an increase in the national debt, then vote him or her out of office.

Conservative View| 4.28.11 @ 8:02AM

Unfortunately the worst is yet to come.

Expect the following. The White House will cut funding to, or simply delay, retirement and Social Security checks. It will close just about everything from public parks to librarys. It will sharply cut back anything and everything that the public sees as governmental expenditures. Why, to make it as uncomfortable as possible on the average citizen.

What does this do for the White House? It shifts all the blame onto the Republicans. You didn't get your Social Security check?, blame those nasty Republicans that would't raise the debt. You don't have your retirement check, blame those job killing, baby starving, forcing mama into prostitution Republicans.

Expect a full court press on the part of the Democrats to make life as miserable as possible if they don't get their way. They are not about to let NPR go under the bus, same with the NEA. They are not about to cut spending on any program that might cost them votes. And don't even think of cutting a dime to Obama Care.

We haven't seen the worst, not by a great deal. The worst is yet to come. I suspect that the Democrats are just waiting for the Republicans to offer up a reasonable budget so they can shoot it down, and then blame the Republicans for the mess that follows. A mess of the Democrats own making.

God save the Union

Old Soldier| 4.28.11 @ 11:39AM

The first thing they will do is stop paying the military. The media will have a great time covering military families losing their houses and unable to feed their families.

It will be great fun for the President until large scale mutinies break out.

Conservative View| 4.28.11 @ 1:16PM

Congress is protected by the 8th and I Marines. Stop paying them and the only thing between Congress and the angry mob would be the DC poliece.

Be afraid, be very afraid.

somnolence| 4.28.11 @ 9:54PM

I'm not so sure that it wouldn't be refreshing to see those Marines in front of the cameras rolling threatening to tear down the damned walls unless the mean green was in the palm of their hands. In fact, I would relish to see that day.

Morgan| 4.29.11 @ 12:47AM

The GOP simply votes to exempt existing government debt obligations and military wages/benefits from any spending reduction measures.

As for the rest, let's just make sure we get the word out that the Executive has a lot of discretion on spending in this situation, so Obama has to take responsibility, make decisions and take the heat. It's a simple message; why is it so confounding to us that we should get it out?

Impeach Don't Wait| 4.29.11 @ 12:33AM

"blame those nasty Republicans that would't raise the debt. You don't have your retirement check, blame those job killing, baby starving, forcing mama into prostitution Republicans."

And of course we already know why all that money had to be spent by Obama, right? Why to get us out of the mess the Republicans created in the first place, of course.

Conservative View| 4.29.11 @ 6:14AM

Three points:

First, this isn't about getting us into debt but getting us out. Your argument is somewhat like a man drowing in a pool. Do you stand around blaming the person who pushed him into the pool, or do you get up and pull him out?

Second; follows the first. The common tactic of the Democrats is when faced with a losing argument is to change the argument, which is exactly what your comment does. You have changed it from getting out of the pool, to being in it.

Third point; you suggest that Obama had to spend money to get us out of the mess the Republicans created. Did he? Just how much good has all the money spent by Obama done, really. Unemployment is still above 8%, the dollar is rapidly becoming worthless, and the country is still in depression. Fat lot of good all that money did. All it did was make the pool a lot deaper.

So, I stand by my statements. The worst is yet to come. And that worst will be a deliberate effort to make it worse by the President in an effort to pass the blame to the Republicans.

Morgan| 4.29.11 @ 12:51AM

I get what you're saying, but this is not catastrophe for conservatives. It's Armageddon for Democrats. Conservatives will have sent a message that every American family understands: we have to get our house in order, and the first thing you do is "stop digging", i.e., stop the wild spending.

To paraphrase Everett Dirksen: "a trillion here and a trillion there, pretty soon you're talking about real money". $14.7 trillion is a lot of money. If the government can't figure out how to spend it wisely then the government shouldn't be governing.

Michael Tomlinson| 4.28.11 @ 8:08AM

Every Republican in the House and Senate should vote "NO!" only after reading verbatim Senator Obama's statement of why he voted against raising the debt ceiling.

As far as Wall Street whining screw them like they screwed the small investors. If defaulting on the debt hurts China that would be good business. As Dennis Miller would say, "F _ _ k them!"

Demand Democrats vote to repeal Obamacare and then force Obama to sign the legislation. Then and only then seriously consider raising the debt limit.

Louis Jenkins| 4.28.11 @ 8:29AM

Can't figure it out, can they. When we've wiped the last crumb from the pot we raise the debt limit.
As the article says, better not to have one. Then the liberals/RINOs can spend all they want, with not a care towards tomorrow. Wait, they're already doing that aren't they. It is all just window dressing and we continue down the path to ruin. Bandaids, beans, and bullets. Now that is something we can sink our teeth into.

Hillel| 4.28.11 @ 8:56AM

Thomas DeQuincy said:"I'm tired of doing things for posterity;How about Posterity doing something for me." By gum! we've figured out how to do it.

Chuck| 4.28.11 @ 9:04AM

I recommend the GOP led House of representatives just ignore the issue, no debate, no vote and when the debt limit is reached just wait and see what the executive branch does.

SpiralArchitect| 4.28.11 @ 1:43PM

SOSDD - they will do as they have done for the past few years: whatever they please.

A. C. Santore| 4.28.11 @ 9:37AM

Let me see, if I have maxed out my credit card and don't get the card limit raised, I won't be able to make payments on my credit card. D'oh?

Why does that not make any more sense than the catastrophe predicted by the progressives - that if we don't raise the government's debt limit, the government we'll default on their debts?

Ray| 4.28.11 @ 10:17AM

I take exception to the claim that we are experiencing the "longed recession in American history." Apparently, the author forgot about th 10 year recession that occurred in the 70's/80's. Believe me, as I experienced that recession personally (I entered the job market in the late 70's but didn't find full employment until the mid 80's), I haven't forgotten.

Ray| 4.28.11 @ 10:19AM

opps, that should read: "longest recession" and not "longed recession."

Mudsoaked Moron| 4.28.11 @ 6:36PM

Good point Ray. I suspect the best possible answer is that Ross and you might define recession differently. Hence, what you see as a recession, he may not.

jackc| 4.28.11 @ 10:55AM

Tax-funded bailouts serve the charlatans, disguised under the pretext of government.
Success is criminalized.
Poverty is exalted.
Failure is propagated through handouts, laziness, and entitlements masquerading as welfare programs.
Taxation, over-regulation, control, and interference in the lives of citizens and business, is being promoted by the power-hungry and big-government charlatans - Obama and is henchmen.
Fire Obama.
Recover America - success is fleeing the once-promised land on earth.
Hire Trumph, with business savvy leadership, to recover America - before it fades into a past glory

James Anderson| 4.28.11 @ 1:38PM

Does nothing scream any louder for a constitutional amendment banning deficit spending than this. Any Republican who will or does not support a constitutional amendment should be defeated in their perspective re-election. Any silly hard cap on spending will fail. HELLO! Gramm- Rudman. Both parties passed it. Celebrated and patted each other on the back. Then walked hand in hand to the courts and had it ruled unconstitutional. The only way now to end this madness is put it to the people, let them decide. If the American people vote yes, than neither courts no congress void the mandate to stop spending.

chris haynes| 4.28.11 @ 2:41PM

All you "grown ups"
Let's call your bluff
Mitch Daniels. Karl Rove. Pawlawty

You say abortion is not as important as fiscal responsibility. That you are the straight talking honest grown-ups. Well, here's another chance to show us that fiscal responsibilty.

uosidedownjack| 4.28.11 @ 8:08PM

Here is a TAX CHEAT who has Cheated the AMERICAN PEOPLE out of Trillion's of Dollars. Who use's Turbo Tax, and he's soooo Smart?? Was at the FED BANK in New York and is now doing the Same to the American People that he was doing at the FED! STOP THE FED STOP the SPENDING!

Jim Hlavac| 4.28.11 @ 9:28PM

And of course, John Boehner, Speaker of the House, brought in Maggie Gallagher of NOM (National Organization [Against gay folks] Marriage) to declare that gay people's lives are the biggest threat to the Republic. Are you all kidding me? Millions spent of money we don't have to defend a law a majority think is wrong (and is just morally wrong anyway.) And still, Republican presidential candidates heading off to the Family Research Council to hear how gay folks are the "biggest threat" to our society. It's not the deficit, they're sure -- it's gay folks. Gay men in particular. Are you kidding me? And NOM and FRC and AFTAH and Rick Santorum and Tim Pawlenty are calling for billions to be spent to round us all up and incarcerate us and force a "cure" on us against our wishes in some Medieval Theocracy -- are you all nuts? Forgo our tax money and spend billions to "cure" a bunch of sissies? Put us all together in a weird Club Med with every other gay guy in the nation? This is rational? But that's what they're doing -- do you all see this? Listen to them, listen.

Look, I'm a right wing libertarian leaning Republican -- for the fiscal sanity of it all -- but to keep hearing that I -- not as an individual -- but merely as a member of a group (can you say "lib-think"?) -- as a gay man is the true threat to the nation -- is ludicrous.

This is nuts. So you all have fun -- but stop the anti-gay crusades -- we have nothing to do with it.

It's the deficit, people, not the gays. Vote Gary Johnson, and get rid of the charlatans and political poseurs. Good luck, to all of us.

investorcs| 5.1.11 @ 8:02AM

All, repeat ALL social issues have a long-term fiscal impact. Fairness for granny back in the 40's now means out of control social security. Millions of unassimilable immigrants both legal and illegal means billions going out but not coming into state coffers, and also means that private hospitals go out of business because their emergency services are overwhelmed. Legalized abortions mean millions for Planned Parenthood and for 'health education' in grade schools and high schools. And repeal of DADT will inevitably mean trillions of dollars more spent by the military for every LGBTQ complaint, re-education program, and leave-spouse-medical consideration under the sun.

Don't make me laugh about how fiscal issues are somehow a world unto themselves. How do you think we got into this mess in the first place? If indeed you are some kind of libertarian (you sound very confused to me), then that means you have the same lack of reality that progressives have already bestowed on this country. Thanks for the added insanity, now please go back where you came from and try to re-examine your gratuitous compartmentalized thinking.

Morgan| 4.29.11 @ 12:44AM

Good article, Ron. But let's not drift into the usual way of thinking and just take it as a given that the ceiling will be raised. The issue is not the viability of the stance but of political will.

The GOP should not be prepared to cave on this issue. There is no need to do so. The only reason to raise the debt limit at this time is to "green-light" Obama's coming spending spree. Don't do it. The GOP is in a position to "just say no". Do that instead.

If not now, when? If not us, who?

Peter L. Griffiths| 4.29.11 @ 8:48AM

Notes issued from a Government deficit are irredeemable debt which does not have to be repaid, though this may be inflationary.

Dee See| 5.1.11 @ 12:20AM

WHY has American Spectator, to say nothing of
our Rockefeller/Tavistock Institute 'managed'
media ---devoted not a single article to the matter
of our 1.4 quadrillion in FAKE derivatives,
the ILLEGALITY of the Federal Reserve
---or the walking perpetrators of now 4 decades
of RED China economic TREASON?????

March on the Federal Reserve New York office,
AND the tax-free, ultra rich, EUGENICS friendly,
capstone foundations this July 4th.

HUAC meets NUREMBERG for 2012--------------

THE ONLY WAY OUT

investorcs| 5.1.11 @ 7:47AM

Why pay any taxes at all, when quantitative easing will create all the money we need out of thin air?

Let's take progressive logic to its logical outcome:

1) US Treasury issues bills and bonds, i.e., debt.
2) Fed monetarizes Treasury securities.
3) Banks lend out their credit reserves up to 10 times.
4) When due, the Fed buys the debt.
5) Currently under the triumvirate of Mein Obama, Little Timmy Geithner, and Helicopter Ben, for every dollar the federal government raises in taxes, it spends two.
6) Obama wants to increase spending forever, so that for every dollar in taxes, the federals spend three or four or etc.
7) So why not reduce taxes to zero?
8) The outcome is still the same: for every dollar not received in taxes, i.e., all of them, the US will spend four or five or etc.
9) Lastly, extend this out to all state and local taxes, in the form of federal block grants.

49% of households don't pay any federal income tax at all, and I want to be included among them, because after all, it's only fair. Let's make it 100% of all America !!!

NO MORE TAXES !!! NO MORE TAXES !!! NO MORE TAXES !!! NO MORE TA....