By special request, I am writing a monetary-policy article.
Sometime between the next election and the installation of the next Congress and President (not by coincidence, but by design), the United States will again hit its statutory debt ceiling. A couple of Wharton School of Economics professors, Betsey Stevenson and Justin Wolfers, have written an article for Bloomberg on the subject. Their economic “theory” rest on the fact that consumer confidence declined prior to the agreement that raised the debt limit, and improved thereafter:
Confidence began falling right around May 11, when Boehner first announced he would not support increasing the debt limit. It went into freefall as the political stalemate worsened through July. Over the entire episode, confidence declined more than it did following the collapse of Lehman Brothers Holdings Inc. in 2008. After July 31, when the deal to break the impasse was announced, consumer confidence stabilized and began a long, slow climb that brought it back to its starting point almost a year later.
Of course, the media was hyping the lie that failing to raise the debt limit meant defaulting on our debt. I contend that it was that lie, not the reality, that caused the drop in consumer confidence. This is a lie that Stevenson and Wolfers perpetuate:
[Refusing] to raise the limit wouldn’t free the government of its existing spending obligations. Rather, it would leave the government with no choice but to default on its debts.
Uh, no. One does not default on one’s auto and home loans because the credit card company refuses to raise you limit, or because you simply refuse to take on more debt. Furthermore, our debt payments are just about the only thing the government is obligated to pay. After all, Congress has not passed a budget in years, so one cannot say it is obligated to pay anything. The courts have ruled that Social Security payments are not a right. But even so, we can simply cash in the Trust Fund bonds, issue new general-issue bonds to raise the cash, and not increase the total debt that counts against the statutory limit. The same goes for the Unemployment Insurance Trust Fund — just replace them with general-issue bonds to pay benefits.
So what other “obligations” do we have? Our entire defense budget is less than 20% of our budget. Our social programs are already run by the States, so just leave them to the States to pay for, too. It is simply wasteful to funnel the money through the bureaucracy of the feral government.
Budgeting is simple. Determine what your income was last year — no bogus projections based on bogus economic models, just hard numbers from the previous year. Start passing spending bills one at a time. First defense, then Justice, Post Office, etc. You know, the constitutional stuff. When you run out of money, stop passing spending bills. No debt limit increase required.