The witching hour is nigh and the threat of the U.S. defaulting on the federal debt is being bandied about as if it were the boogeyman.
Fear mongers from the left and right both say the country will go belly up unless the debt ceiling is raised by the Aug. 2 deadline, that it will no longer be able to pay on its $14.3 trillion debt or honor other financial obligations unless it goes further into debt by borrowing more money.
That’s like a person maxing out on a credit card and taking out a second card to pay off the first. Most people know that doesn’t work; it only gets worse. The same holds true for a country or any other entity that pretends addition is subtraction.
There are some in Washington, very few, who understand the simple truth. They also understand that there’s no need to default even without borrowing more. What’s needed is to prioritize spending. Make payments on the absolute necessities, including past loans, and cut back on the rest. That’s the same thing a person or a family would have to do under similar circumstances.
The federal government takes in roughly $2.8 trillion per year in taxes. Yet, between the welfare state and the warfare state it spends $2.73 trillion, according to the Office of Management and Budget. And that amount is spent in only six areas: Social Security, national defense, Medicare, income security programs, Medicaid and SCHIP, and unemployment benefits.
Making matters worse is that the $2.73 trillion figure doesn’t count interest or principle on the current debt or the fact that all other government spending — another $1 trillion or so to actually run the government — is based on borrowing.
Of the six areas mentioned, only defense spending is constitutionally authorized, but the Constitution doesn’t authorize an imperial government. How much of Pentagon spending is for actual defense? Wars in Iraq, Afghanistan, Pakistan, Yemen, and Libya are not defensive wars. They’re offensive — in more ways than one — and imperial in nature.
Also not authorized is a continued military presence in Germany, Japan, and Italy, countries we defeated in a war that ended 66 years ago. Our defense is not dependent on maintaining military forces in Thailand or South Korea either, or in having at least 700 military installations in an estimated 130 different countries.
It’s not just military spending that’s eating us alive. The welfare state is killing our finances, too. Even without the exorbitant military spending, those programs are not viable and money will ultimately run out for them. There’s no great military spending in Greece, yet people there have been rioting because that government can no longer afford to pay the dole on which so many people are relying.
Spain, Portugal, Italy, and other European countries are rapidly approaching the status of Greece and the U.S. could easily follow suit.
Granted, the Greek debt is roughly 140 percent of its GDP while our debt is 96 percent of ours. Without spending cuts, even for those well-intentioned warm fuzzies, we risk economic collapse. Other empires have spent themselves to destruction — like Greece, Rome and ancient Israel. It’s the citizens who wind up paying the price.
When an individual’s debt exceeds 40 percent of his or her income, banks either stop lending to that person or begin to jack up the interest rate. The difference between a person and a government is that the individual can’t arbitrarily increase his income, while a government can. The dirty truth is that when governments borrow, they borrow on their taxing authority, their ability to increase taxes, to give themselves a raise at the people’s expense. They use the industry, creativity, and productivity of its citizens as collateral for loans. Our labor, our ability to earn is used to secure the loan. Our industriousness is treated as no more than chattel of the government class.
President Barack Obama made an interesting comment during his televised speech on July 25.
“We can’t allow the American people to become collateral damage to Washington’s political warfare,” he said.
How ironic since he and the other statists, left and right, treat us as collateral for their loans.
Yet, raising taxes won’t cut it now. They should actually be reduced with the immoral income tax abolished. But consider that there are 1,200 billionaires in the world with a total net value of $4.5 trillion. If the U.S. government confiscated all that wealth and applied it to the debt, the country would still owe $10 trillion. That was the debt when George Bush left office.
Big government types from both sides of the horizontal plane — the Harry Reids and the John Boehners — talk about cutting spending, reducing debt and waste, but their words, based on their acts, have about as much credibility as a fairy tale.
Their ideas of cuts are to simply not increase spending as much or as rapidly as they normally would, and even when there are actual cuts proposed, they come years after increased spending. Those cuts never come about anyway because there will be another Congress seated, a Congress with no obligation to follow what this Congress proposed.
Come Aug. 2, the Earth will continue to spin on its axis and people will work, rest, and eat, and the United States will still exist and still be in debt whether or not the debt limit is raised. It likely will be raised. That’s what Republican and Democratic Party politicians do. They’ve been doing it for generations.
It’s time to cut the spending, stop the borrowing, and pay off the existing debt so there’s no fiscal sword hanging over the heads of the next generation.