Debt Ceiling Idiocy
Treasury Secretary Janet Yellen wrote a letter to Congress on January 13th, a Friday. The letter’s objective was to alert lawmakers to the fact that the statutory debt ceiling, now set at $31.381 trillion, would be exceeded on January 19. The Treasury must then use extraordinary measures, such as accounting tricks, to prevent a U.S. government default after that (which is currently).
The maximum amount that the United States government can borrow to cover its existing debts is known as the debt limit, or debt ceiling as it is also known. This covers benefits including Social Security, Medicare, and military pay.
According to Yellen, the debt ceiling is a legislative cap set by Congress. The government’s budget, which is likewise decided by Congress, has no bearing on the debt ceiling.
For its part, Congress spends like inebriated sailors on shore leave. However, in order for the Treasury to continue borrowing the funds it requires to fulfill the commitments Congress has already made to it, Congress must raise the debt ceiling.
Do you see the absurdity of it all?
The procedure produces excellent partisan politics. In instances like the present, this is especially true. when Republicans control the House of Representatives and there is a Democrat in the White House.
Right now, President Biden and House Speaker Kevin McCarthy are preparing to play a game of chicken. In exchange for lifting the debt ceiling, budget reductions and other political points are sought after. All of this must be finished by June, when Yellen anticipates that the benefits of her extraordinary measures will be completely depleted.
Over the next six months, there should be plenty of exciting political histrionics. However, the spectacle of it all is absurd. As always, the debt ceiling will eventually be increased. Additionally, Congress will keep wasting the country into oblivion. This is why
Debt Ceilings are for Idiots
The great dollar devaluation is the consequence of decades of rampant currency debasement policies. The mechanics are executed in tandem between the Federal Reserve and the Treasury. The Fed supplies the credit – created out of thin air. The Treasury borrows it from the Fed. And spends it.
But what does the Treasury spend it on?
The Treasury spends it on whatever Congress wants. Congress has the power to stop these currency debasement policies, policies which impoverish the middle class and concentrate wealth into fewer and fewer hands. Yet Congress perpetuates the madness. Because Congress is addicted to borrowing and spending your money.
The current debt ceiling debate, and the impending elevation of the debt limit for what we believe will be the 79th time since 1960, represents but another milestone in the recline and flail of the USA. In fact, according to the government’s own inflation calculator, a dime in 1960 could buy what a dollar buys today.
Where did the other $0.90 go?
It has been inflated away by Congress, along with your life savings.
Congress, through its debt ceiling increases, allows the Treasury to access the credit it needs to meet the spending obligations controlled by Congress. It’s Congress who directs the Treasury to spend this printing press money into the economy via its insane myriad of welfare and warfare programs.
As this new money flows through the economy, and the supply of money increases faster than the supply of goods, prices adjust higher. There’s no mystery to it.
So long as Congress continues to raise the debt ceiling, it’s impossible for the U.S. government to technically default on its obligations. However, to keep perpetuating more and more debt, Congress, with the assistance of the Fed and Treasury, resorts to turning the dollar into toilet paper.
The reasons for this ultra-mega spending problem are countless. However, one primary reason is that the debt ceiling debate comes after the spending has already occurred.
This is precisely the wrong time to try and get a handle on runaway spending. The right time to do this is when setting the budget – before the money is spent. Alas, the allure of the printing press makes balancing the budget impossible.
This is why debt ceilings are for idiots. Not because we believe the Treasury should be given a blank check. But rather because perpetually raising the debt ceiling has become as mindless as checking boxes on a form.
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Sincerely,
MN Gordon
for Economic Prism
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