May 16, 2011
The Debt Ceiling Mirage
It was announced by US Secretary of the Treasury that we have reached the debt ceiling. A few things to note, from an armchair economist’s perspective:
- It is a self-created crisis. Imagine you had the ability to set the credit limit on your credit card, and you set it at a level that you KNEW you were going to exceed. Lousy planning, eh? The current debt ceiling, at about $14 Trillion, was created in February 2010, when the Democrats controlled both chambers of Congress and the White House. They created the ceiling…they created this moment.
- You can ignore “the sky is falling” reactions. Secretary Geithner said there is 11 weeks of what an economist might call “excess liquidity,” so that a healthy debate can continue over the coming weeks, or even months.
- The crisis is NOT the debt ceiling. It is the $14 Trillion of debt. That is what is causing a threat to America’s monetary dominance in world markets, the threat of runaway inflation and hampering our ability to have effective foreign policy in the Far East. “Solving the debt ceiling crisis” is akin to that classic scene in The Wizard of Oz, when the wizard frantically proclaims, “Pay no atttention to the man behind the curtain.” The crisis is that our national debt is too high, relative to GDP (over 70% of GDP), caused by government spending that, on an annual basis, is nearing 25% of our GDP. Let’s focus on the real crisis: The Federal Budget Deficit.
My generation will spend our lifetimes working to pay for today’s spending. The question is not, “How can we figure out a way to borrow more money.” The question is, “What sort of country sells their childrens’ future to make their own lives more comfortable?” As usual, the crisis is deeper than dollars and cents, and gets to a spiritual crisis. What will it take to turn the hearts of the fathers to their children? Apparently more than a self-created debt ceiling crisis.
