Friday, October 11, 2013

Just say no: redux

I have written before that the debt ceiling is the only thing that can force fiscal discipline on the federal government. Given that government “revenues” are almost $3 trillion a year, that is more than enough to meet all interest and principal payments on the outstanding federal debt but not enough to cover all government expenditures – hence the continuing and growing deficit. The debt ceiling would force the federal government to prioritize its spending by placing a limit on its ability to continue to borrow. Of course if the debt ceiling is not raised the UA would default but is that necessarily a bad thing. Most people seem to think that a default would mean that the US would default on the interest and principal payments. But that would be a choice made by the Treasury and the president. In reality, there is more than enough to pay on the debt as promised, social security, the military and medicare. What would be missing would be the 25 percent left to pay all government workers and fund all government programs. Thus, the government would default on its obligations to its employees and not to its debt holders. In essence federal workers would be faced with what workers face in the private sector when their employers go out of business. If this is not catastrophic for the private sector then why is this catastrophic for the government? As it now stands, federal workers have been sheltered from facing the consequences stemming from a bloated government making irresponsible decisions. Of course the government will choose to shut down parts of the government that will create the most pain amongst its citizens in order to force the continuation of unlimited largesse. Nonetheless, the day of reckoning is going to come if we continue on the path that we are on. I consider this more irresponsible that the termination of unnecessary spending and growth of the size of the government. I wrote before that the congress should just say "no". I reiterate that plea.

2 comments:

Steve Esposito said...

OT: Listening to you on Hallerin Hilton Hill's show right now. I hope you appear more often! I received my BS, Business Administration, Finance in 1994 when you were running the show at UT. It seemed like the Finance Department was the only place at UT where Free Market/Laissez-Faire policy was ever examined.

Thank you for your service to the University and to the field!

BTW, did you ever get into your opposition to the gold standard? I feel like an outcast in libertarian circles when I mention it, since that is what we were on in 1929 and the government just misuses it anyway.

H.A. Black said...

Thanks. Here is the earlier posting on the gold standard.
http://haroldblack.blogspot.com/2011/06/all-that-glitters.html