STAFF NEWS & ANALYSIS
The Big Budget Debate and a Personal Solution
By Daily Bell Staff - October 21, 2015

Speaker John Boehner seeks compromise with Democrats over raising the debt limit … House Speaker John A. Boehner has lowered expectations for reaching a sweeping budget deal with the White House and instead is focusing on the more immediate task of averting a looming showdown over the debt ceiling. Raising the debt limit has become one of the most difficult votes for Republicans in Washington, and the Nov. 3 deadline raises the risk of a federal credit default if Congress fails to act. Boehner (R-Ohio), who hopes to retire at the end of the month, has signaled he is prepared to abandon the demands of his party's conservatives by considering a straightforward bill that Democrats would support. – LATimes

Dominant Social Theme: Let's act like adults regarding the US's insupportable debt by raising the amount we can borrow.

Free-Market Analysis: John Boehner is aiming for a final compromise with Democrats before he leaves office. Rather than trying to negotiate with a number of dissatisfied legislators on his side of the aisle, he wants to work with the opposing party. A deal with Democrats would further exacerbate poor relations between mainstream Republicans and libertarian/conservative Tea Party types but Boehner's decision to retire has emancipated him.

Not having to acquiesce at least partially to the libertarian/conservative right, Boehner is free to negotiate with whom he chooses. When it comes to raising the already impossible-to-pay-down national debt by setting a new, more generous debt ceiling, the Democrats are far more cooperative legislators.

Whatever comes out of the House will find an easier path in the Senate, where the always obliging GOP Majority Leader Mitch McConnell of Kentucky has already said he will "wait and see how the House deals with this."

Treasury Secretary Jacob Lew is nervous about the nation getting too close to the debt ceiling, warning a big "accident" could happen. In fact, the debt limit has already been breached, but Lew has taken actions to juggle accounts in such a way that the ceiling is legally intact. These have been referred to as "extraordinary measures."

If by some chance, the libertarian/conservative element in the House does manage to disrupt the process of creating a new and higher debt ceiling, defaults would begin and the US would be in danger of a downgrade by the rating agency Standard & Poor's. This would result in higher borrowing costs.

Past budget compromises rating the debt ceiling have resulted in cuts to both social programs and military spending. But the current standoff is complicated by the growing unpopularity of these cuts. Republicans don't want additional military cuts and the Democrats don't want to pare more social programs.

It is possible that Boehner will push through a "grand compromise" with the help not of Republicans but of most of the Democrats. Alternatively, the new Speaker may be Rep. Paul D. Ryan (R-Wis.) who is currently trying to ascertain whether the House Freedom Caucus will support him.

One person who presumably would not support Ryan – cast as a disciplined conservative but more probably squishy like Boehner – is former House member and Republican presidential candidate Ron Paul.

Paul is retired now but still active. He writes a regular column every week and this week's column is entitled, "Debt Ceiling Debate: Don't Mention Warfare/Welfare State!"

Paul's stance in the article is that it would be "irresponsible" for Congress to raise the debt ceiling. He believes there needs to be a hard cap to Congressional spending or otherwise government will grow without restraint. Here's more:

Anyone who doubts [the necessity for restraint] should listen to the bipartisan whining over how sequestration [budget cutting] has so drastically reduced spending that there is literally nothing left to cut. But, according to the Heritage Foundation, sequestration has only reduced spending from $3.6 trillion to $3.5 trillion. Only in DC would a less than one percent spending reduction be considered a draconian cut.

Defense hawks have found a way around sequestration by shoving billions of dollars into the Overseas Contingency Operations (OCO) account. OCO spending is classified as "emergency" spending so it does not count against the spending limits, even when OCO is used for items that do not fit any reasonable definition of emergency. Yet, even using OCO to boost military spending by as much as $80 billion does not satisfy the military-industrial complex's ravenous appetite for taxpayer dollars.

This matter-of-fact recitation about how the various federal power centers always find ways to gain access to taxpayer dollars makes depressing, if accurate, reading. Budget legislation is always so complex that there are loopholes that, sooner or later, will be exploited. Plus, larger spending bills are always written or influenced by those who benefit from them.

Paul points out that endless spending at an ever higher rate will eventually lead to massive price inflation because the Fed must print more and more money. This will inevitably lead to a crisis, and Paul's point is that if the Congress cuts now the process will be a controlled one instead of one driven by crisis and chaos.

The alternative to harsh budget cutting is an enlightened "gradual unwinding of the welfare state in a manner that does not harm those dependent on federal programs."

The idea of Congress undertaking such a task is one that Paul admits is fairly hard to fathom. In fact, he says it will not take place "until enough people have embraced the ideas of liberty to force the politicians to reconsider the proper role of government."

These individuals will have embraced "principled arguments against welfare and entitlement programs." In other words, Paul sees the issue as a moral one. He concludes, "Supporters of liberty will not win the political battle over government spending on welfare and warfare until we win the intellectual battle over the role of government."

Here at The Daily Bell we write about this sort of issue. But as much as we admire Dr. Paul, we have a hard time believing that there will be a freedom-oriented intellectual renaissance in the US. There are simply too many entrenched interest groups that will fight furiously to ensure that such a movement is not established or expanded.

What can take place, however, is a steady process of individual enlightenment and "human action." In the movies a dashing leader may lead social change accompanied by faithful followers. But in real life individuals in concert with small communities may come to alternative understandings about sociopolitical and economic change.

These epiphanies are much more frequent now thanks to the influence of the Internet that has informed people about alternative resources and lifestyles. Physical ownership of bullion, second passports and residences, access to farmland, whole, "natural" food and potable water are among the priorities of those who want "lifestyle insurance."

After Thoughts

Such lifestyle insurance doesn't have to be expensive. However, the sooner it is implemented, the sooner the individual and his family will have additional options to counteract the federal chaos and defaults that are on the way in the US, Europe and generally throughout the world.

Posted in STAFF NEWS & ANALYSIS
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