Saturday, January 12, 2013

The Debt Ceiling. Return of the Mayan Apocalypse


Remember when the world ended in 2012, just like the Mayans said? No? Me either. Remember the economic calamity that resulted from the last debt ceiling debate? Remember how the world was going to end if Europe wasn't bailed out? Remember how the economy was certainly heading into a recession, or depression, or how our current recession or depression would get worse if we didn't raise taxes on the millionaires and billionaires making $250,000 per year? Well the sky is falling crowd is on to their new calamity. Return of the Debt Ceiling!

We are already hearing the claims the US Government will "default" if the debt ceiling isn't raised. This is of course a sloppy choice of words. Default refers to an inability to pay the interest on debt and/or make scheduled principal payments. According to the US Treasury annual receipts were $2.4 trillion in fiscal 2012 and interest payments were $359 billion. Defaulting on interest payments would be a choice, not a consequence of a static debt ceiling. There's about $3 trillion of debt maturing in the government's fiscal 2013, and it's a pretty safe assumption the Treasury can roll over that debt, that is, borrow money to pay off the debt due. All of that without increasing debt. So again, default would be a choice, not a necessity. Not raising the debt ceiling would require some difficult (well at least difficult for some) choices about current spending.

In order to avoid the debt ceiling law your buddies on the Left are twisted into pretzels and just plain silly. For instance, this is Ezra Klein's summary of the argument Chris Hayes makes in favor of the trillion dollar coin:

Past periods of great strain in American life have often led to unsettling (at the time) innovations in currency policy. Abraham Lincoln printed greenbacks at a staggering rate during the Civil War. FDR took us off the gold standard during the Great Depression. Perhaps, when we look back, the platinum coin, or scrip, or the 14th Amendment (which I'm told is the preferred option of Senate Democrats) will be seen as another of these necessary innovations that helped the country survive the deep dysfunction taking hold in its political system.

Yea, the trillion dollar coin, that will do it, because this is an existential crisis like the Civil War. These are two of the leading intellectual lights, and I use that term loosely, the left has to offer,

It seems every time we have one of these discussions we can't avoid the hyperbole and distortions. Raise taxes or teachers, or firefighters will be laid off. Your kids won't get that sub-par education they are offered. National parks will close. Traffic lights will stop working. Police will stay home. The Mayan apocalypse.

For a party that makes such a stink about being believers in science and adherents to the truth it sure spends a great deal of time denying reality. Which is this: You want a welfare state that will require federal taxes to increase to about 25-30% of GDP. Right now federal taxes are about 15% of GDP. So to get to your liberal paradise taxes need to be increased 66% to 100% over current levels. State taxes will have to go higher as well. I think the reason you don't put the argument this way is because you know you would be laughed out of office. Instead you phrase it like this: Everyone has a right to free health care. Sandra Fluke should not be denied the right to have me pay for her birth control. I would be thrilled if Sandra felt free to fornicate at will. I do however prefer my taxes not double in order to accomplish that noble goal.

This chicken little act is tiresome. I say bring on the Mayan apocalypse.


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