Should the US Congress increase the Federal government’s debt ceiling? Our media is not doing a very good job of explaining the options and probable results.
Some say our government will shut down and default on our national debt if we do not raise the debt ceiling. Others say refusing to increase the debt ceiling is the only way to stop the out-of-control government spending of money we do not have.
Currently our Federal government is spending more than $3.5 trillion a year and has revenues of about $2.2 trillion (www.usgovernmentrevenue.com). It is borrowing or printing the rest. Of the rest, about 30% is actually being borrowed; the other 70% is being created out of thin air by the Federal Reserve Board (what they call QE2), according to PIMCO, which manages the world’s largest mutual fund.
Our lenders are cashing in their dollars to invest in something else. They see the dollar’s value and purchasing power decreasing.
This deficit spending is, in effect, the way our government leaders are stealing the savings of our middle class and retirees. Their savings will continue to be worth less and less until they are worthless.
Last year, the Federal government’s debt, as a percentage of our Gross National Product (GNP), increased from less than 50% to more than 62%, the highest it has been since World War II. It is now at 66% according to the Wall Street Journal. That means we would have to give almost two-thirds of all goods and services produced in the USA this year just to pay off our Federal government’s debt.
When state and local municipal debt is included, our national debt is close to 100% of our nation’s annual production. That means we are close to bankrupt.
If it were our home, it would mean that our mortgage is higher than the home’s sale value. We would have no equity to borrow against.
To compound this, only 51% of GNP comes from wage earners who actually produce something of value for others. The other 49% comes from government borrowed or printed money which is paid out largely to buy votes and keep people dependent on the government, principally through social services, which comprises more than 70% of Federal expenditures according to statistics provided by the IRS in tax instruction booklets.
What does it all mean? If the Congress votes to increase the debt limit, it could lose its ability to provide any social services in the not-too-distant future as inflation will make such payments worth less and less. We will lose our national “home” and safety net.
The Federal government has enough tax revenues coming in to fund critical national security and Social Security payments. If the Federal government is prudent in cutting spending, it need not default on its debt. And if the Federal government really needs the cash, President Obama has the authority to borrow government pension funds, which he is doing already.
Presently, conservative Republicans do not have the ability to get any meaningful budget cuts since the Senate and White House are controlled by liberal Democrats. Only by Congress refusing to increase the debt limit will the Obama administration be forced to make the substantial spending cuts needed to keep this country from chaos.
Our elected officials must explain to the public that the government cannot provide all the benefits promised or they will become worth less because of inflation. Only by growing the economy can we increase tax revenues to pay for social benefits. That requires a drastic decrease in burdensome regulations and massive cuts in government agencies and subsidies.
The only way that can happen and the US economy can rebound is to NOT increase the debt limit and to cut job killing bureaucracy and regulations. Naturally the majority of the media will scream about denying essential services.
A responsible president will start by eliminating duplicate programs in different agencies. He will return all unused TARP and Stimulus funds to the Treasury. He will require repayment of government loans made to financial institutions, auto companies and other favored inefficient subsidized entities.
President Obama should lift the ban on all viable offshore and land-based oil exploration and drilling, which would bring in billions of additional royalty payments and create thousands of jobs. He must drastically reduce or eliminate regulatory and Cabinet agencies like the Departments of Agriculture, EPA, Energy, Education, HUD, Interior, Transportation, Labor, Commerce, etc., whose onerous regulations are destroying the ability to create viable businesses and jobs.
Cost-effective healthcare requires less government intrusion and more free market forces determining prices of doctors’ services; second, a few big hospitals and medical groups need competition to keep them from having the power to set reimbursement pricing; third, big pharmaceutical company’s drugs need to be priced based on supply and demand, not government edict; fourth, the number of medical doctor students and foreign trained doctors must not be limited; and fifth, healthcare insurance and co-pays should be the individual’s lifetime responsibility (unless the individual is temporarily or permanently a ward of the state), and certainly not an employment benefit which places the employer as one more expensive layer between the doctor and his patient.
Much of doctors’ operating expenses are administrative staff costs consumed by arguing over what the insurance company will or will not pay. And, human nature, being what it is, means employees tend to regard such benefits as “freebees,” not realizing that by overusing them they are raising everyone’s costs, including their own.
Lastly, only by convincing our Congressmen that if they do not refuse to increase the debt ceiling until substantial cuts are made, they will probably be rightly blamed for the continued economic collapse of our nation and will be held accountable by the voters.