Friday, July 29, 2011

Eliminate the Debt Ceiling

The official position of the Libertarian Party is to say "No" to raising the debt limit. It is a perfectly sensible position, because the alternative is the destruction of the dollar through inflation, and then hyper-inflation. The federal government is going to have to adopt austerity measures someday, whether by choice or by circumstance inflicted on the country. Of all the major party presidential candidates, only Ron Paul and Gary Johnson have spoken about the need to bring the finances of the government under control, and have spoken about how if the hard choices aren’t made now they will be made for the country later.

The problem is, the sane voices won't be heard. The Keynesians and Monetarists who control fiscal and monetary policy in the government will never accept that anything should actually be cut, other than a few token items of window-dressing. Their plan is to keep raising the debt limit every time it is reached. The entire show is Kabuki Theater because the Congress and the President know that the voters are actually watching this time and actually demanding that something be dome about the excessive spending.

But they do not believe in restraint. So perhaps the opposite approach should be taken on the debt ceiling issue. Give them exactly what they want, but give them more of what they want than what they are asking for. Eliminate the debt ceiling. Pass the necessary legislation to tie all government debt issuances to the budget, so that the Department of the Treasury can automatically sell debt as needed when needed without any restraint other than the budget passed by congress.

As crazy as that idea sounds, it has some advantages. The first is that, since sane voices are not able to engineer austerity measures directly, this would be a way to engineer them sooner rather than later, perhaps avoiding the final stage of hyperinflation. Although the Keynesians and Monetarists will never understand it, eliminating the limit entirely will signal to lenders that the United States government has no intention of getting spending under control and therefore is not a good risk for lending. This will cause the austerity measures to start sooner rather then after hyperinflation ruins the country.

Another benefit is that it ends what is a side-show, albeit a side-show that is much closer to the real issue than those in charge would like. Even after two congressmen in a row have resigned over sexual misconduct issues the attention of the public is still on excessive spending. Since the public is actually watching the government instead of the tabloids the debt limit is what is being debated instead of the actual imbalance. A "ten year plan," reminiscent of Soviet five year plans, is introduced with back-loaded spending cuts, and the public isn't buying it. Tax increases, which will eventually be necessary, are proposed without actual cuts, and the public isn't buying it. So everyone in Washington is debating the debt limit, and how the government will shut down without an increase to the debt limit. Eliminating the debt limit will force discussion on the budget instead of on an artificial self-imposed limit.

Although it would be disaster, there is a disaster coming anyway. So perhaps the best thing is to be intentionally wrong so that when the San Sebastian Mines are seized, the truth about them is laid bare for the world to see.

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