Posted on 08/05/2011 11:39:58 AM PDT by betty boop
The Debt Crisis: Why There Is a Stalemate
By Jean F. Drew
Ask just about any person on the street nowadays what the U.S. “debt crisis” is all about, and he’ll probably tell you it’s about “raising the debt limit.” He has had it drilled into his head — by the Obama Administration, the Democrat Party, the labor unions, and their various enablers in the “official” media — that the international credit reporting agencies threaten to downgrade sovereign U.S. debt from Triple A to a lesser — and costlier — grade because Congress has failed to increase the debt ceiling — the current limit on the U.S. credit card — which will finally top out at $14.6 trillion dollars on or around August 2.
Thus we see yet again how misinformation — deliberately and skillfully communicated with full knowledge that it is misinformation by our public officials and their cohorts — is absorbed into the public consciousness and accepted as “truth.” In reality, this claim is put out there as a diversion from the real issue.
Which is: Arguably, what Moody’s and Standard & Poor’s are looking at is not so much whether Congress will approve an increase in the federal credit card limit; it’s whether the United States has the means to pay off the debts it has already amassed — i.e., that $14.6 trillion. Without printing even more phony money to do it.
If Congress does not raise the debt limit, the government still has sufficient revenues coming in for debt service. What it doesn’t have is more play money to fool around with. It would be forced to prioritize its expenditures. It would be interesting to see how President Obama and his Democrat colleagues actually do this, in an election year.
Which is the very thing they are trying to prevent, by threatening to veto any short-term stop-gap measure — simply because they want to kick the can down the road to after the 2012 election. They want a measure out of Congress to ensure a longer-term, if still temporary solution….
The Republicans in Congress so far have refused to budge on tax increases — which the President demands in order to sign off on a debt increase package. And yet the President plans to blame the Republicans for their intransigence if our credit rating is downgraded, for whatever reason. If his media flaks have their way, maybe he could get away with this.
But all of this is just so much political circus. This fight over the U.S. credit card actually masks, or disguises, what the real fight is fundamentally all about; which boils down to two irreconcilable visions of the size and scope of the federal government; which necessarily have following fiscal implications. In short, the “victor” in this debate will likely control the American future for some time to come.
On the one hand, there is the “progressive” vision of a system of government that is essentially unlimited. It cannot be limited, because it must always respond to the plight of the less fortunate in our society. This seems to be the heart of the Democrat vision of a thriving polity: What you cannot do for yourself, the government must do for you. But of course, the problem there is the government has no money of its own. All it has is what it can commandeer from the productive citizens of our society.
As John C. Calhoun might say, the Democrat party in general is the party of tax consumers. Thus in economic matters, the focus is always on the demand side of the economy.
“Demand” can always be pumped up my simply printing more money — or so the thinking goes. Unfortunately, if the government prints more money, this cheapens the existing stock of money in public hands, making it worth less. Thus the taxpayer class on which the government must rely for tax receipts is even further despoiled, making them increasingly less capable of generating the requisite federal revenues.
On the other hand, Calhoun would perhaps characterize the Republican party in general as the party of tax payers, the people who pay the freight any time the government makes a new promise to its citizens. Thus there is in general at least some sensitivity for the “supply side” economic argument in GOP circles.
Calhoun laid out his thoughts on how this “unequal fiscal action of the government” — after all, half the people in this country do not pay any federal income tax at all — divides the American people into “two great classes.” He did so in a not-well-enough-known classical American political work, A Disquisition on Government (1854).
When Calhoun was writing, there was no federal income tax. The revenues to the government then came largely in the form of protective tariffs on goods Americans freely bought, or not as the case may be. And yet the dynamics of the situation he described continue, and are exacerbated, by the existence of the federal income tax, first implemented in 1913.
What is different about an income tax is it represents a levy, not on an economic transaction as a tariff (or sales tax) does, but on the productive, creative activity of the very people who generate the wealth of a society, the very people on which the federal government relies for the payments of its promises. (It has been said that the best way to get less of a thing is to tax it.) This inevitably leads to unequal fiscal action by the government, as it “starves” tax-paying Peter — the productive, wealth-generating members of society — to “pay” tax-consuming Paul, who is probably a member of a “disadvantaged” class whose interests the government wants to protect, or is otherwise a favored constituent of the government in power. Of course, Paul pays nothing for his “privileged” status.
The bottom line for Calhoun was that taxation inevitably would be skewed by government into a system of “unequal fiscal action” because this is the way government can further aggrandize its position relative to the people, so to increase its power over them — over both taxpayers and tax-consumers alike.
As Calhoun explains,
“The necessary result, then, of the unequal fiscal action of the government is, to divide the community into two great classes; one consisting of those who, in reality, pay the taxes, and, of course, bear exclusively the burthen of supporting the government; and the other, of those who are the recipients of their proceeds, through disbursements, and who are, in fact, supported by the government; or, in fewer words, to divide it into tax-payers and tax consumers.
“But the effect of this is to place them in antagonistic relations, in reference to the fiscal action of the government, and the entire course of policy therewith connected. For, the greater the taxes and disbursements, the greater the gain of the one and the loss of the other, — and vice versa; and consequently, the more the policy of the government is calculated to increase taxes and disbursements, the more it will be favored by the one and opposed by the other.
“The effect, then, of every increase is, to enrich and strengthen the one, and impoverish and weaken the other. This, indeed, may be carried to such an extent, that one class or portion of the community may be elevated to wealth and power, and the other depressed to abject poverty and dependence, simply by the fiscal action of the government; and this, too, through disbursements only, — even under a system of equal taxes imposed for revenue only. If such may be the effect of taxes and disbursements, when confined to their legitimate objects, — that of raising revenue for the public service, — some conception may be formed, how one portion of the community may be crushed, and another elevated on its ruins, by systematically perverting the power of taxation and disbursements, for the purpose of aggrandizing and building up one portion of the community at the expense of the other. That it will be so used, unless prevented, is, from the constitution of man, just as certain as that it can be so used; and that, if not prevented, it must give rise to two parties, and to violent conflicts and struggles between them, to obtain the control of the government, is, for the same reason, no less certain.”
Placing citizens into antagonistic relations is aided and abetted by the ideological language of class warfare — which is frankly what we are getting out of the Obama Administration these days.
What cannot be grasped, however, is: How can an expansionary government continue to expand, if it despoils and ruins the very people who pay its bills? If you kill the goose who lays the golden eggs — who will then lay the golden eggs?
All socialist, totalitarian, top-down “progressive” attempts at government organization so far have crashed and burned because they have all turned a blind eye to just this problem. What most have had in common was contempt for the very people whose creativity and productivity lead to the wealth creation that any government must tap, in the form of revenues, in order to stay in business.
Even if there were to be an outright total seizure of all the wealth in public hands, it wouldn’t be enough to pay off the $14.6 trillion and still leave the nation standing. That $14.6 trillion amounts to the entire GDP of the United States. If you destroy the engines of wealth-generation, if you despoil the essential human capital of the nation, then where does tomorrow’s prosperity come from?
Obama could seize the wealth of the nation; but it wouldn’t help him much in the long-run. As Hitler found out. He seized the wealth of every Jew he could find, but killed the Jew. The wealth was soon enough dissipated. The point is, with the Jew dead, there was no way of generating new wealth….
Now there is a total stalement in Congress, because the two sides live in two different moral and ideological universes. The president is a no-show, because he doesn’t want to say or do anything that might complicate his reelection in 2012. In any case, anything the government can achieve now probably comes as “too little, too late.” The fat’s already in the fire….
In conclusion, the present writer strongly doubted there would be a debt ceiling extension, and still strongly believes that a downgrading of the credit-worthiness of our sovereign debt will occur before too long. The current Congressional stalemate virtually ensures that such will come to pass.
And then the American people will have to live with the miserable fall-out of Congress’ — and the President’s — dereliction of duty.
The good news is — 2012 is a presidential election year….
©2011 Jean F. Drew
The Conservative Underground, Vol. 4, Issue 16, August 2, 2011
The legislation the President signed is a travesty. The Republicans in Congress demanded that for every dollar of increase in the debt limit, a corresponding dollar’s worth of federal spending cuts must take place. Tax increases were entirely off the table. What we got was immediate increases in debt, with spending cuts over the next ten years, most of them in the out years. And who knows if future Congresses will be bound by the promises of spending “cuts” that this Congress has made? Meanwhile the total federal debt increases to over $17 trillion, and likely to be much more than that because of the slowdown in the economy. So much for “debt reduction”; and the Bush tax cuts (which Obama is determined to repeal) will be revisited very soon, by the “special congressional commission” — 12 politically hand-picked people — charged with negotiating the next round of “cuts.” Behind closed doors. So much for transparency.
This struggle was nothing but political circus. At the end, the Tea Party didn’t “win.” The American people did not win. But the Democrat Party has managed to craftily “shape the battlefield” for the next conflict in their decided favor, when that special commission meets.
Speaker Boehner — God bless him — at some point seems to have decided that his role was to achieve a bi-partisan political compromise. That he did. But that compromise does not touch the problem of out-of-control federal spending. Which I thought was the object of the game.
When the two sides of the political debate are so ideologically and morally divided, how can there be any kind of real compromise? The Progressives don’t want “compromise,” they want victory — by any means fair or foul, by hook or by crook. Victory, for them, is staying in power.
They hope to do this by exploiting the great divide in the American populace, so well described by John C. Calhoun in his Disquisition. Even now the American people are being divided by the language of class warfare and the demonization of political enemies. That seems to be all the social progressives really have to offer. Against all experience and history, they evidently believe that somehow their rhetoric can actually instantiate the “reality” they prefer, to which we, the American people, are being forcibly recruited and for which we are being forcibly fleeced.
“Divided government” doesn’t work anymore, if it ever did. The next presidential election will be the last best hope of the people who want to stop the further squeeze on the American middle class — which is, of course, the taxpayer class that funds everything the federal government does.
Just some thoughts, FWIW….
Nobody in DC wants to correlate the rising debt ceiling with declining jobs.
The rising debt ceiling has two consequences....
more regulation ...
to occupy employees in expanding federal bureaucracies...which expand because “they have more money” and another layer of bureaucrats need their 20 year promotions... Each round of regulatory expansion is the effective equivalent of another targeted tax increase on the object of the regulation.
more taxes...
The rising debt ceiling has demands and expectations of creditors for new elements of “revenue raising” by the Feds...taxes or fees.
In this strangling environment job creation is simply NOT possible.
In fact the only logical conclusion..can be ..is that the Federal apparatus -initially an asset to the United States..by virtue of its abilities to raise an effective Navy in the late 1700’s, and early 1800’s to facilitate overseas trade on behalf of the States, has become nothing other than the States greatest liability at this point in time. In the absence of profound regulatory and taxation reform-which is not capable of coming from the same minds that created the problem..we may well be at the end of the line.
For DC to face this fact...means the end of the K St-Congressional Party cycle in DC-the one that keeps repeating “2.4Trillion” as their mantra.
IMHO...the only solution is a 50 state secession from DC at this point...with a completely new “Constitutional Re-Federalization”..
FYI — if you feel like engaging in the “post mortems” re: this disgusting travesty of Congressional action....
Good set of two, but there is a third. Incurring the debt is done by siphoning off capital from the free market that would otherwise be used to create jobs.
It’s just simple math. We need a Senate majority and a new president...we don’t have enough of the right people. That’s all there is too it.
The entire “crisis” was created by and orchestrated by BH Obama and H Reid for their own purposes——to thrust the killing blow on the American economy! Now Obama squeals about jobs jobs jobs. Remember that jobs are the furthest things from his Marxist mind. Every word that issues from his mouth is to get re-elected. Anne Coulter reveals his method in “Demonic”.l Get it. Read it. Believe it!
One of the major problems is that Congress and the President don’t realize how pissed off the people are getting and I mean all the people. I have never seen this amount of anger in our country. The sad thing is, it seems as though our President could care less. He may not last until the election.
good point...but the fact interest rates are so low..DESPITE such massive Federal borrowing, means NO business is borrowing money...because in this tax and regulatory climate...credit is useless. It CANNOT grow..and so no point in borrowing AT all. Which compounds the Federal deficit which is used to growing in parallel with job and business growth.
this is a terrible, terrible trap...out of which the only route is effective dissolution of the Federal Gov’mt as we know it, and Constitutional Re-Federalization. If properly and timely done-America would own the next 100 years.
We used to owe 14.2 trillion dollars. We were to “cut” some 2 trillion dollars. In less than 2 years we will owe 17.2 trillion dollars plus change. That is called “cutting spending”.
Since “cutting” is the same as “taking away”, it would read to the 3rd grade student: “14 take away 2 = 17”
And therein lies the problem.
The Washington aristocracy flourishes while the rest of the country suffers. And the MSM ignores this critical fact.
It’s time to rename MSM the “Minitrues” (as in George Orwell’s Ministry of Truth in 1984), Guardians of the Washington Aristocracy.
Here is one of the fast ones Obama pulled while our eyes were on the “Crisis”, this from the Townhall Spotlight:
It’s Now Official!
Over The Counter (OTC) Bullion trading is now Illegal for all U.S. Residents.
The commodity futures trading Commission (CFTC) Now has a foot hold on the physical bullion market. A feat this Government Agency has tried to achieve since its 1974 inception.
Coincidentally, 1974 is when Americans were given back the right to own Bullion
(1933- Dec 1974 ban on Bullion) by executive order (11825), by then President Gerald Ford.
The CFTC’s June 14th, meeting on The Dodds Frank Act, set forth the final rules on all
Over The Counter markets, including retail commodity transactions of physical Bullion.
This is first step toward their ultimate goal.
Discover Their Ultimate Plot
Their reasons why and what you could do to protect your wealth.
I love having a discussion with an intelligent and knowledable person! I agree entirely with you. I will also add that banks are not lending much to either consumers or businesses, partly because of Dodd-Frank, which underscores your point. My point is that even if we got rid of the fear of increased taxes and many of the recently imposed regulations, we would still have a credit problem because of government spending beyond its means, unnecessarily tapping into the pool of available capital.
Nice explanation of Congressional Mathematics!
Thanks for your kind words.
That math could form the basis of a profound philosophical treatise. One which I never plan to write. :>)
But Sister Betty might.
LOL.
Anyone else wondering if the Poseur will be asking for another debt ceiling increase before the next election? He spends money faster than Mary Todd Lincoln and his ‘takers’ coalition is hungry.
Excellent presentation!
I hate sounding like a broken record but the record is what it is. The root of the present situation is the result of the determined and seemingly indomitable march of Socialism/Marxism?Communism for the last 100 years. Rather than recap that journey I will jump to the end.
I know you have said some of this but rather than use space quoting you I will just charge ahead. Marxism, to use the gentler term for Communism, is about destruction. It sees the world as already divided between the haves and the have-nots, and where none exists it creates the divisions. Rather than seeing this as the natural order of things it sees it as unfair. Therefore, the existing order must be destroyed.
There are many strategies, tactics and methods used to accomplish this, all of them devious and unfair. They are liars and they honor the lie. To them it is a trait to be admired.
Eventually, like a house built upon sand, a philosophy of destruction destroys itself. That is what happened to the USSR. Yet, the USSR did not disappear, it just lied and reorganized itself. The Communists leaders finally realized that Communism may be a good system for the rulers but it is a lousy economic system. So they went underground and tried to convert to a semi-free enterprise economy. That is like being a little bit pregnant and it won’t work.
China is also trying a hybrid system and so far it is working in that it is using its cheap, some say slave, labor to compete in a global market. Sooner or later they, too, will see that you can’t be a little bit pregnant and go one way or the other.
The goal at the moment, of Obama and Soros, is to collapse the USA economically, socially, and militarily in order to establish a One World Government, headquartered in the USA. That is what is playing out in front of us.
Well said, mo. I entirely agree.
Among other things, the federal Leviathan is hell-bent-for-election to extinguish the Tenth Amendment of the Constitution (not to mention the Ninth). Anytime a State passes legislation it does not like — e.g., regarding illegal immigration or firearms policy — you can count on the insufferably block-headed Attorney General Eric Holder to bring a federal lawsuit against that State.
You wrote:
IMHO...the only solution is a 50 state secession from DC at this point...with a completely new “Constitutional Re-Federalization”..Jeepers, it may have to come to that. Especially if the presumably "independent" courts consistently find for the federal government in such disputes. But we aren't quite "there" yet. Or so it seems to me.
Personally, I am so glad the States are "pushing back" against overweening federal power, as 26 States did WRT Obamacare. But then again, that same federal power has already made the States "dependent" on its ill-gotten largesse in so many ways, that there is probably a limit to how much "pushing back" the States are willing to do. We'll see about that....
I as a citizen have no standing to sue the federal government for its irresponsible policies. But the States do have such standing. At least for now.... I hope they will "stand up" while they still can....
Thank you ever so much for writing, mo!
p.s.: You might enjoy Calhoun's Disquisition — he was the quintessential "States' Rights" guy....
So, in effect, your two points of Regulation and more Taxes is essentially one point - more taxes.
In the absence of profound regulatory and taxation reform-which is not capable of coming from the same minds that created the problem..we may well be at the end of the line. ...
IMHO...the only solution is a 50 state secession from DC at this point...with a completely new “Constitutional Re-Federalization”..
I don't think a 50 state secession is possible. Too many states like NY, CA, and Mass. So that leaves us with only some states willing and we are back to the 1850s all over again.
The best solution is to keep the Tea Party movement energized and retake the Senate, increase our majority in the House and elect a dynamic and conservative President. Even then, and it is easy to forget this in light of all the propaganda, we will need a filibuster proof majority in the Senate. We hear so often that when the Republicans had all three branches we still didn't do so-and-so. That was because the Democrats used every procedural and rules gimmick in the book to stymie the Republicans because we had only a small majority.
It still amazes me that we never seem to return the favor, although I think the Tea Party Republicans in the House did actually do their part. For that they were called terrorists. The Democrats are called clever and wise when they use even more severe tactics.
There is another, perhaps more important, reason banks aren’t lending. They got pressured into the mortgage crisis by politicians and activists. When all went sour they were blamed and beat over the head by the same people who pressured them to do it. Now, with interest from the Fed at essentially zero, they simply buy Treasury notes at a profit and avoid any risk in the market place.
This has a lot in common with what the Democrats do when they increase the size of governments.More employees equal more union dues paid by those employees. The union leaders repay the Democrats with political contributions and “volunteers” for their elections. It is money laundering pure and simple.
The same is true with the banks getting free money to buy US securities to keep the Democrats afloat.
One thing I forgot in responding to you was discussing the rating institutions like Moody’s, etc. The Democrats were using the threat of a lowered rating for the country unless we increased their borrowing power. The same entities who were threatening to lower the rating are those who gave AAA to those worthless Mortgage Secured Derivatives. Therefore, how valuable was their judgement to start with. Very little it seems to me.
However, when you consider Fannie and Freddie, the Democrat involvement in their creation and perpetuation, their part in the financial crisis, the involvement of the Wall St. folks, like Goldman-Sachs and others, the in-the-middle-of-the-night withdrawal of money market funds which triggered TARP and the U.S. bailout of the international financial market, mostly to foreign banks and insurers, and then the expansion of the “crisis” by the Democrats who wanted more billions for “stimulus”, and the dots connect nicely to my original scenario. This is a Marxist generated global collapse.
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