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Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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Heading into the Storm

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The debt ceiling was recently raised again, this time without any fanfare among federal officials or their supporters in the mainstream press. The federal government had, once again, reached the maximum limit on the amount of debt it was permitted to incur. Raising the ceiling enables U.S. officials to continue incurring more debt, thereby adding to the enormous pile of debt already on the books.

The reason that a debt limit is set in the first place is because too much debt is a bad thing, even a dangerous thing. Thus, by setting a limit on the total amount of debt that can be incurred, public officials are in essence declaring: This is the total amount of debt that the federal government can incur.

At that point, you would ordinarily expect rational people to slash spending so that the government is no longer spending more than what it is receiving in taxes. If the amount of spending equals the amount of tax revenues, there is no need to borrow. If there is no need to borrow, there is no need to add to the total amount of debt already in existence. There is no need to violate the limit.

But public officials never do that. As soon as they lift the ceiling, they continue spending more than what tax revenues are bringing in. If public officials even intimate that they’re going to spending even just slightly, the mainstream press screams like a banshee, exclaiming that people will be dying in the streets and that the terrorists will be coming to get us if warfare-welfare state spending isn’t permitted to continue rising.

So, this sordid little game just keeps going on, just as though people were playing poker and roulette on the Titanic. Everything will be fine, U.S. officials, the mainstream press, and mainstream economists declare. Just keep spending and borrowing, they exclaim. It’s the key to economic revival. It will bring America back. We should just keep lifting the pesky debt ceiling every time it’s reached.

Rational types—e.g., libertarians—know that all this can only end badly. Look at Greece, wallowing in impoverishment after decades of out-of-control welfare-state spending. Look at those American cities that have gone into bankruptcy as a result of overwhelming debt and low tax revenues. Look at the British Empire, which was bankrupt at the end of World War II. Recall how conservatives once claimed that Ronald Reagan brought down the Soviet Union by making it spend itself into bankruptcy.

Unless libertarians can turn the tide before it’s too late, Americans are likely to learn the lesson of governmental profligacy the hard way. No government can spend a nation into prosperity. If that were possible, every nation on earth would be wealthy beyond belief. Government spending, especially when it’s financed by ever-increasing debt saddled onto the backs of the citizenry, is the road to ruin.

Today, the U.S. national debt stands at more than $17.2 trillion. Each citizen’s share of this debt is some $54,000. You can keep track of this here. In 2014, federal expenditures are expected to exceed federal tax revenues by around $600 billion. That means another $600 billion will be added to the total amount of the debt, which will mean that the national debt will be rising to $18 trillion.

What’s the government doing in the meantime? For the past few years, it’s been expanding the money supply, hoping that that it can once again “revive” the economy with additional amounts of fiat money injected into the monetary system. That’s what quantitative easing is all about. It’s equivalent to the old process of simply printing large sums of paper money and injecting them into the economy.

We haven’t yet experienced the results of all that new money being injected into the system. My hunch is that we are about to. As the price level rises, notice that they’ll be blaming “greed” and rapaciousness in the private sector rather than acknowledging that their monetary expansion is the root of the problem.

Inflation is equivalent to injecting a large dose of heroin into a drug addict’s veins. Injecting newly printed money into the body politic might feel good in the short term but it is an absolute disaster in the long term.

Look at Argentina, whose government has been inflating the money supply in enormous quantities in the attempt to pay for out-of-control expenses and to liquidate debt. It is now in the middle of an enormous monetary crisis. The Argentine peso has recently lost 20 percent of its value. Notwithstanding that devaluation, the peso trades at a 50 percent discount on the black market. Dollar reserves are at a 7-year low. The government continues to spend, borrow, and inflate the money supply.

Don’t forget also that it was the Argentina government that not so long ago seized everyone’s retirement accounts and replaced them with government bonds to help pay for the government’s out-of-control spending.

That’s the road the United States is on. It might take us longer to get there, given the relatively wealthier private sector we have in this country. But don’t forget: Unlike many other countries, the United States has both a welfare-state sector and a warfare-state sector, both of which are responsible for the out-of-control spending and borrowing that are besieging our nation. Both sectors are overwhelmingly powerful. Neither of them is willing to let go of its share of the massive tax loot it receives from the private sector.

That’s the road that America is on—the road to grave financial, monetary, and economic crisis—the road to bankruptcy, asset confiscation (e.g., gold and retirement accounts), and moral debauchery. Unless libertarians can prevail in bringing about a change in direction, the end of this road will not be pretty.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.