The Maxwell Family

The Maxwell Family
Pam & Chip with Beverly, Oto, Tomas, and Laura.

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Thursday, October 17, 2013

Message to Tea Party (and anyone else with a conscience)

Are you still going to have Congressman Lee Terry as a headliner at Tea Party events? Click below for my take on the debt ceiling deal.

The debt ceiling is a statutory limit on spending created by Congress. It’s not in the Constitution.

There almost always has been a national debt, with upward spikes at times of crisis such as the Civil War and World War I. Sustained and ominous growth of the debt occurred during the New Deal in 1930s. In 1939, Congress created the debt ceiling that is in the news today.

Because the debt ceiling was created by legislative action, it can be changed by legislative action. Congress has raised the debt ceiling more than 70 times. By routinely raising the debt ceiling, Congress has rendered it virtually meaningless – except that periodic debates about whether to raise the debt ceiling send nervous tremors through financial markets because of feverish speculation that America will default on its debt-financing obligation.

After the latest raising of the debt ceiling, a supersize headline on the front page of my local newspaper blared: BACKING AWAY FROM THE BRINK.

What "brink"? There need not be any threat of default. The Constitution requires America to service its debt, meaning we make the periodic debt payment on what we have borrowed to finance deficit spending, similar to a mortgage payment. There is no default on American credit if we follow the Constitution and pay that obligation first, which is about $30 billion per month.

Then there is the problem of insufficient remaining money in the treasury to pay for the other spending that has been approved. The federal government should cut spending to match revenue or raise revenue to match spending. It should not keep taking the coward’s way out and borrow more money to cover the difference.

In doing research for this post, I came across an Oct. 17, 2013, news item at www.nbcbayarea.com that ridiculed U.S. Senator Rand Paul (R-KY) for making the same argument: There’s enough revenue to cover the debt-financing obligation; pay it and then prioritize remaining spending. The story relied on a professor at Berkeley Law School who served in the U.S. Treasury’s Office of Tax Policy from 2010-12. The professor and former Obama administration bureaucrat is a classic example of what we’re up against in trying to save the country. He said government computers are programmed to pay bills in the order they are received; they aren’t set up for prioritized spending. He said there was “absolutely no authority” for prioritizing spending and it would be “illegal” to do so.

It’s the typical leftist mentality. Gosh, the computers aren’t wired for that, so that’s the end of the conversation. This giant machine has been set in motion and no one can do anything about it. We must serve it and obey it and dare not change it or the sky will fall on us.

Some leftists laugh at people who believe in God and practice religion, yet they become completely servile to the god of big government.

Hey, professor: If the computers aren’t programmed to make the debt-financing payment first, then that system is unconstitutional. There is authority for prioritization. It’s called the Constitution. It mandates that America service its debt. The Treasury Department’s computer system is not exempt.

As for the rest of the budget, Congress and the president absolutely are authorized to get back into the budget and prioritize. In fact, it might be a healthy exercise to go through each line item and say pay this first, pay this second, pay this third, and so on.

No more whining from House Republicans about being unable to do anything because the House is only one-half of one-third of the federal government. The president is not supposed to be the dominant force in fiscal policy. The Supreme Court is supposed to apply the rule of law, not make policy. The Senate originally was an appointed body whose members were beholden to their state legislatures. Popular election of senators has created another division of the Washington ruling class with its center of gravity in D.C. Still, the House is supposed to be a power-House on fiscal issues. The House was given the power of the purse because it’s the part of the federal government closest to the people, with members facing election every other year. The House is supposed to drive policy on taxing and spending. Part of the reason for other branches seizing policy-making power has been the passivity of the House.

I disagree with those who say raise the debt ceiling with no strings attached, then reform the budget. It will never happen. The same “we’ll fix it before the next crisis” refrain surfaces every time the debt ceiling is breached. Those who utter that refrain never have delivered on that promise. Why would anyone expect that to change?

The next round of the debt ceiling drama is in February. The House should declare right now (November 2013): No raising the debt ceiling and borrowing more money unless a balanced budget amendment has been added to the Constitution. Congress immediately should crank out to the states a balanced budget amendment with an effective date 10 years out, and state legislatures should approve it ASAP. Otherwise the debt ceiling should not be raised in February and the federal government should buckle down to the brutal task of paring the budget to make spending match revenue. The president and members of Congress will have to earn those six-figure salaries by making tough fiscal decisions. Either we start chopping spending now to match available revenue, or we do it in a more measured manner over 10 years under the pressure of a constitutional provision requiring a balanced budget. Fiscal reformers can no longer do business-as-usual and raise the debt ceiling without getting anything meaningful in return.

If the House doesn’t have a majority willing to do that, then voters need to press candidates on this issue and send to Congress those who will form the needed majority.

I can’t resist sharing this again:
 
I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article taking from the federal government the power of borrowing.
                                                         Thomas Jefferson, 1798
 
Jefferson saw the danger of funding expanded government by borrowing. Apologists for deficit spending note that Jefferson, as president, resorted to borrowing to fund the Louisiana Purchase. True, but at 4 cents per acre, the deal to finance the $15 million purchase price over 20 years was fiscally sound. Meanwhile, Jefferson had annual budget surpluses in all 8 years of his presidency. The Louisiana Purchase was paid off as planned and in the 1830s America enjoyed it’s only debt-free period.
 
That kind of fiscal responsibility is in our national DNA. We need to rediscover it.
 
If President Obama won’t agree to a balanced budget amendment, then the House should leave him no option but to make the payment on our $30 billion monthly debt-financing obligation without taking on more debt. If he refuses and lets the federal government default on its debt-financing payment, that will unleash unnecessary financial chaos for the nation and world, and provide grounds for impeachment for failure to uphold his oath to “preserve, protect, and defend the Constitution of the United States.”
 
The House should give the president and the Senate two choices: join us in getting a balanced budget amendment into the Constitution if you want to raise the debt ceiling again, or join us in prioritizing and reducing spending according to what’s available in the federal treasury. If the president and the Senate refuse to cooperate, then they own resulting shutdowns or defaults. The House position should be: No more stealing from the future to subsidize the “bad choices” of the present unless there is a constitutional commitment to end this intergenerational theft within a decade.
 
If the course of action is to prioritize and reduce spending, what would that look like? On a monthly basis, the United States collects about $200 billion in revenue and spends about $300 billion. Contractors must be paid for goods and services delivered, though contracts for future projects might be casualties. Social Security and Medicare recipients paid into those programs and planned their retirements on them, so those payments should be left alone.
 
The debt-financing payment, Social Security, and Medicare total about $140 billion per month, leaving about $60 billion in unspent revenue. The military, Medicaid, and all other budget items would be subject to significant cuts.
 
Bye-bye Obamacare. It’s astounding that the federal government would consider such an expense when it already is so deeply in debt. Pardon me for doubting the assertion that Obamacare will reduce the deficit.
 
A huge portion of the reduction, perhaps most of it, would come from nonmilitary payroll. I am sorry for the pain this would cause people who would lose their jobs, but it has to happen. We can’t keep going on the way we have been. The question is whether it happens immediately or gradually over a decade. I prefer the gradual approach so those affected have time to plan their next move, but only if there is adoption of a constitutional provision requiring the budget to balance within a decade. Absent that, the budget cutting starts now to whatever degree necessary to avoid additional borrowing.
 
If I could get an audience with leading defenders of the status quo, Republicans as well as Democrats, my question would be, “What is your end game?” We can’t keep borrowing or printing extra money forever to cover our deficit spending. Eventually creditors will pull the plug. Even if they don’t, the value of our currency will be destroyed. I don’t want to live in a society where it costs $20 to buy a loaf of bread. That’s not what I want for my children and grandchildren.
 
The end-game answer I would expect from defenders of the status quo is the same answer they give in public debate: Raise taxes and have the federal government take over more of society. But that won’t pay for all the spending. Plus it kills jobs and economic growth as business owners – the non-cronies not getting special favors from the government – go into a protective shell.
 
We who want better are up against people who think our capitalist system will keep producing revenue to serve government no matter what government does to it. They are wrong and they are going to produce a living hell for us, and an enduring hell for our children and grandchildren.
 
Several thoughtful friends have asked why I advocate such a high-stakes, high-pressure course of action. A balanced budget amendment that does not take effect for 10 years doesn’t seem all that severe to me, but of course immediately balancing the budget would be severe. My experience serving in local and state elected office and working in local, state, and federal government tells me that there is no way defenders of the status quo will change anything unless they face extreme pressure – in this case, denying the option of borrowing if they won’t accept a balanced budget amendment with a delayed effective date.
 
I keep coming back to the alcoholism analogy. You cannot bargain or negotiate or find common ground with people who don’t want to change. I don’t see defenders of the status quo ever deciding to wean themselves and the nation from the unsustainable system they have created, so they must be defeated in the halls of Congress and on the ballot.
 
Maybe it’s the nature of the issue that forces such a showdown. Government is either limited as enumerated in the Constitution, or it is unlimited. There is no middle ground. Efforts to find a nonexistent middle ground are a futile and increasingly dangerous waste of time as the nation edges closer to a fiscal Niagara Falls.
 
The issue of limited government versus unlimited government is as fundamental to the future of America as the issue of abolition/union versus slavery/secession was in the 1860s, or independence versus colonialism in the 1770s. I’ll say it one more time: Reasonable people are not going to agree on everything, so it comes down to majority rule. I and others of like mind must convince a majority of fellow citizens to join the crusade to reestablish limited government in America.
 
Maybe our side should use graphic images of children being drowned or buried under a remorseless deluge of water or earth representing debt; anguished little faces disappearing beneath the rising swells or growing mountains of debt; little hands reaching out in desperation before being engulfed by 100 trillion cubic feet of water or earth. Maybe 20-somethings should be featured as victims to get their attention and show them that it’s the fuddy-duddy conservatives who are trying to stop the left from overwhelming the young with an immoral debt burden. 

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6 comments:

Anonymous said...

Totally agree the time has come to stand for the future of this country, running hiding and taking cash for pork barrel politics. Happens all the time the total Nebraska delegation embarrassed the state.

Tony Staup. said...

I agree.It will take consistent simple graphs to convince the moderates and Regan Democrats for a significant vote shift. Boehner and McConnell should Never be on Tv or stage without iconic graphs. Think like Ross Perot.Same with social media. Simple graphs and charts.Keep it simple and obvious.

Tony Staup. said...

I agree.It will take consistent simple graphs to convince the moderates and Regan Democrats for a significant vote shift. Boehner and McConnell should Never be on Tv or stage without iconic graphs. Think like Ross Perot.Same with social media. Simple graphs and charts.Keep it simple and obvious.

OmaSteak said...

While I agree with your objective (a balanced budget amendment) and the sentiment behind it Chip, do you really think that even after servicing the monthly debt that not paying the military, Social Security benefits, Medicare, etc., etc. wouldn't cause about the same financial shock wave that a true debt default would? Yes, lots of wasteful spending would be cut but at what cost? Markets would tank...think Great Depression level collapse...interest rates would spike...that $30 billion/month then becomes $50 or $75 billion/month...GDP would collapse as money moving around the economy dries up...the US dollar immediately is significantly devalued and the Yuan becomes the new global standard...and so on. This scenario is likely to happen anyway but why would anyone deliberately try to set it in motion even the achieve a "noble" end? Do you honestly think this kind of severe economic disruption could happen without some significant social chaos? I hope you have your bunker fully stocked and plenty of ammo if you get your wish. Please give me a little notice so I can finish the process of relocating out of the country before I have to use all my gold and silver holdings to bribe the border guards on the way out.

Chip Maxwell said...

OmaSteak,

The threat of pain is what gets us a BBA, and a decade to phase in spending reductions. Otherwise we start the pain now. The scenario you describe becomes more certain the longer we wait to correct course. When I add debt, Social Security, Medicare, and military, I come right up to $200 billion per month. If we want to make room for other things, then we have to cut from the first four. What's your alternative? If somebody has a better idea, I welcome it. I can't think of another way to break out of the fiscal death spiral. If we accept your argument that we can't reduce government spending because that would take money out of the economy, then we are saying we must spend ourselves to death like an alcoholic drinking himself to death because it would be too painful to stop drinking. Also, the money that the federal government puts into the economy is taken out of the economy! Or it's created out of thin air, thus fueling inflation and reducing the value of the dollars in our possession. Let me be clear (as the president likes to say): I don't want disrupted lives and communities and chaos in the streets. I'd rather adopt a BBA and tame the federal budget over the course of a decade. But I will not keep robbing from the future and guarantee the financial collapse on the nation.

OmaSteak said...

Chip,
I fully support a BBA (btw, which variation out there already do you support?), but I want to elect enough constitutional conservatives to get it passed but not by walking right up to the edge of a self-started financial crisis to do so. A financial collapse may be coming and the US dollar will be replaced as the world's reserve currency. One of those two is avoidable but how do you propose to eliminate the millions of progressives in the US and remove their malignant influence from society? History gives us a model...look at Chile and you'll see how it can happen.