Don't Raise the Debt Ceiling!
As of November 7th, the total U.S. public debt outstanding reached an astonishing $13.7 trillion. This means that although Congress just raised the debt ceiling to $14.3 trillion back in February, the new Congress will face another debt ceiling vote almost immediately next year. Otherwise, the Treasury will not be able to continue issuing debt to fund government operations.
The upcoming vote will provide an interesting litmus test for the new Republican congressional majority, especially those new members closely identified with Tea Party voters. The debt ceiling law, passed in 1917, enables Congress to place a statutory cap on the total amount of government debt rather than having to approve each individual Treasury bond offering. It also, however, forces Congress into an open and presumably somewhat shameful vote to approve more borrowing.
If the new Congress gives in to establishment pressure and media alarmism about "shutting down the government" by voting to increase the debt ceiling once again, you will know that the status quo has prevailed. You will know that Congress, despite the rhetoric of the midterm elections, is doing business as usual. You will know that the simple notion of balancing the budget, by limiting federal spending to federal revenue, remains a shallow and laughable campaign platitude.
Of course congressional leaders – now Republicans – will tell America that they plan on balancing the budget soon, but they just need some time. After all, we have to keep the government open, right? We can't have an "emergency" shutdown of vital government services. But somehow Congress always finds money for emergency spending, in the form of supplemental appropriations bills for TARP bailouts, troop surges, and the like. Why is there never an emergency that justifies less spending???
Surely we are facing an emergency debt spiral, as evidenced by the Federal Reserve's recent commitment to buy another round of Treasury debt. It's now quite obvious that the U.S. government plans to inflate its way out of debt, and the world is fleeing our dollar in response. Just 7 years ago Congress raised the debt ceiling to $6.4 trillion, which means the federal government had doubled its indebtedness in less than a decade. Annual deficits for 2011 and beyond are projected to be at least $1 trillion. By contrast, the entire federal debt amassed from the founding of our nation until President Reagan took office in 1981 – a period of roughly 200 years – was $1 trillion. So it's no exaggeration to state that federal debt is growing exponentially.
I have two simple proposals when the new Congress convenes in January. First, refuse to raise the debt ceiling. Find a way, month by month, for Congress to spend only what the Treasury raises in revenue. Second, start over from scratch with the 13 appropriations bills that fund the federal government. Reject any talk of baseline budgets or discretionary spending. It is all discretionary, and members of both parties should vote against any 2012 appropriation bill that is not at least 10% smaller – in nominal dollars – than its 2011 counterpart.
A motivated Congress could begin to slow the tide of debt by taking the simple step of cutting federal spending by 10% across the board for the next few years. Let's hope it does not take the complete collapse of the U.S. dollar to provide this motivation.
Posted by Larry Melvin on 01/06/11 04:18 PM
Dr. Paul, I couldn't agree with you more. Defy the banksters and rely on what we have available. Better yet trust in the Lord with all your heart and lean not on your own understanding.
Posted by Texastwin827 on 12/01/10 03:44 PM
John, you are incorrect. As a Texan (and Ron Paul supporter) I can tell you that Ron Paul NEVER left the Republican party.
At the time he was running in the primaries, he was also up for re-election (as a Republican). While many people wanted him to leave and run as an Independent (aka Libertarian) he did not as he preferred to hold onto his Congressional seat, should he not be selected as the Presidential candidate (which makes him a very wise man).
Posted by P. W. Dunn on 12/01/10 09:28 AM
Senator Paul: My prediction is that it will be business as usual because the Republicans don't have the guts to end the ponzi scheme. But even if they did, there are apparently ways that the Obama administration can continue the party in Washington.
Posted by Chris Coles on 12/01/10 09:21 AM
"Chris, you lost me on the venture capital part. Are you confusing tbtf bank money and private investor money?"
No, the confusion is the basic system of investment being driven by what you describe as tbtf bank money. Private investment stems from a wide variety of attitudes and origins, but the major investment system used over the last few decades is based on what one might describe as Venture Capitalism. It is my opinion that Venture capitalism is the basic fault line causing all the inherent problems with the wider economy. You need to read my free PDF book; The Road Ahead from a Grass Roots Perspective Click to view link
In essence, I believe that Venture Capitalism has created a feudal mercantile economy and is based on classic feudal; not true capitalist principles, very particularly; free enterprise capitalist principles. That what we have today is an investment system driven by a completely anti-competitive attitude that takes full control of the business to enable the short term sale onwards into the largest competitor.
That Venture capitalism is the root cause of the United States becoming a classic European style feudal nation replacing the ancient Lords in their castles with tbtf banks.
Posted by Ethnic Dish on 11/30/10 10:03 PM
After investigating and really trying to figure out what's happening in this country (economically and otherwise), it becomes reasonably clear (to me, at least) that what we are living under is not a democratic republic as I was taught in school, but rather a mercantilist oligarchy. Consider:
-our plague of lobbyists in DC looking to manipulate legislation to favor their business,
-our government's "protective tariffs" (which actually hinder international trade, rather than encourage it),
-our public/private central bank that regulates our money supply (enriching those involved in the process).
This is mercantilism. Of course, political theory is given very little attention in public high schools. It is only taught in that we were made to memorize a Facts&Dates history of "the world" (Eurasia and America " NORTH America).
The point is, very few people consider what is happening in a more theoretical context. Certainly nobody on TV is talking in such contexts. It was be interesting to see what would happen if they were.
Posted by Dogwood on 11/30/10 05:49 PM
Chris, you lost me on the venture capital part. Are you confusing tbtf bank money and private investor money?
Posted by Chris Coles on 11/30/10 12:35 PM
The FED buying Treasury debt is simply passing the problem from one balance sheet to another.. In which case, asking for a reduction in spending will only shrink the volume flow of funding; not replace it.
The problem that must be faced is NOT a need to reduce government spending; it is the need to replace a massive amount of government spending, (ergo, notionally creating false employment), with the means to create a prosperous free enterprise private sector economy. Adam Smith, in The Wealth of Nations, set out the solution in a single sentence hundreds of years ago.
"The number of useful and productive labourers, it will hereinafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed."
The problem is not one created by government, (though they have certainly had a hand in its implementation), it is one created by the several too big to fail investment banks.
Put simply, their feudal mercantile system, centred upon venture capitalism and mergers and acquisition that they have imposed upon the Western economies; is what has signally failed and the responsibility lies at their feet. Moreover, they refuse to recognise any responsibility; and have no means to change their own mistaken direction to put the problem right again.
Until everyone takes this message on board, constantly arguing that the problem lies with Congress, is to argue to find your direction with an old fashioned Iron bucket pulled down over your eyes. All you see is your feet and they point in the wrong direction.
The Western economies need a new form of financial institution dedicated to removing the feudal impediments to the supply of that capital stock Adam Smith so easily describes; right back to be invested at the grass roots of the all the Western nations presently infected with the most simple disease; insufficient private sector employment.
Those who doubt my point should all, before any new meeting, in any form of government institution; take a long walk through their most disadvantaged communities and understand that what they see is exactly what a medieval slum looked like.
The only long term solution to tax poverty and over borrowing is the investment of the likes of Adam Smith's capital stock, over many years, back into the grass roots of your respective nations to replace the lost prosperity.
Posted by Bill on 11/30/10 12:14 PM
Ron admits this FED money creation is a PONZI scheme. Why not enforce the June 1963 executive order of JFK. It said the FED could NOT charge interest on monies loaned to the Government.
Posted by Bambilin on 11/30/10 10:44 AM
When are we going to realize we cannot afford to police the world? bin Laden was right, he'll defeat us by breaking our bank. The defense budget is the most "discretionary" of all our budget.
Posted by Puzzled on 11/30/10 09:52 AM
We've head all about freezing Fed. pay. When my daughter made $40,000. per yr. as Administrative Assist. The ones in The Fed make $170,000. How is this work so different?
Talk about cutting SS income 10%, most of us live below poverty level now. Most of the 535 congress people are millionaires, why not let them,&all millionaires, give their $1,600.00 per term per month to people who are retiring without any savings, whose income is from SS?
Why not cut 35% of Congress people's pay, which would save $32,768,750.00 of Tax dollars. Then take away all the perks of Congress, that would save another $20,000,000. And do a check on the military machine, (Production) Where one man who should be retired is collecting pay 16 overtime hrs & SS, but who produces only one part in 8 hrs, when in any other shop besides Bell Helicopter, he would be required to make up to eight parts, or maintain production levels.
Why can we not get that done?????
Posted by John Danforth on 11/30/10 09:45 AM
Ron did get out of the party. He ran for president on the Libertarian ticket.
You can thank his run in the last primary for lighting the grass fire that is sweeping the nation right now.
The two-party system has rigged the game in the U.S. to make it easy to keep out third-party challenges. But in making it easy, they left an Achille's heel. They made it easy for us to co-opt them! It's done by running for precinct delegate in your neighborhood. Most precinct delegates have little to no idea what they are doing. They go to the conventions and vote the way they are told.
But when an informed group of people become delegates, they can control the party. Even a relatively small number can gum up the works for business as usual. It's the delegates who decide who gets to run for office. Learn this, and you learn how much of a difference YOU can actually make. WE will run THEM out!
Posted by Chris F on 11/30/10 08:05 AM
Love Ron. He realizes that his solutions will not fly in DC, the current members of Congress live with ideas that fantasy economics is made true because they say it is true. We will see a complete collapse of the US dollar.
Posted by Kenn on 11/30/10 07:46 AM
Asking politicians to not spend other peoples money. It seems Ron may be another who doesn't get out and about much!
By the way,,, has anyone ever wondered why Ron never got out of the party? Its been a sticky point with me, even though I took the hook and voted for him. Even Rand is a Republicrat. I know,,,I know,,, they're taking the party back! but....
Posted by Vauung on 11/30/10 02:59 AM
Does charismatic leadership really belong at the heart of the definition of fascism (even though it is certainly an important feature)? Perhaps more essential is the systematic dilution of property rights, achieved through the supplanting of private decision-making by political directives.