Debt Ceiling: What Republicans Should Do
The specter of breaching the debt ceiling is once again upon us. Suspension to the nation’s borrowing limit expires July 31.
Elected Republicans currently are out of power in the House, Senate, and White House. Accordingly, they have no power to decisively act on the debt ceiling in a positive way. And, they have only a little influence. But, it is a great opportunity for Republican candidates if they would recognize that promises can be made to voters and then resolve that these be met when they are returned to power.
The high water mark for fiscal conservatism over the last couple of generations or so was Newt Gingrich’s House forcing President Bill Clinton to enact balanced budgets. Subsequently, elected Republicans fell off the wagon, so to speak, with the result that, after a while, the Tea Party movement was spawned to re-emphasize fiscal conservatism. This movement, which had a strong influence for some time, has waned. As a result, for more than a dozen years, elected Republicans have authored record deficit spending bills when in power. But, there is a confluence of two forces that gives hope for the future. The first is President Donald Trump’s personification of the stricture to Do What You Said You Would Do. The second is the need for the Republican Party to stand for something significant besides having a different color team jersey.
Congressional Republicans should specify to Democrats that their collective vote to raise the debt ceiling depends upon four conditions being met. The first is requiring individual appropriations bills. The second is the elimination of baseline budgeting. The third is changing the charter of the Federal Reserve. And, the fourth is eliminating funding for certain government programs, offices, agencies, and departments.
Before elaborating on the prerequisites for raising the debt ceiling, a little consideration should be given to the typical accompanying call for a Balanced Budget Amendment. Unfortunately, almost all BBA proposals are mechanisms to ratchet government spending up by confiscating ever-increasing levels of taxpayer wealth. Any BBA should have a clause that states the maximum taxation rate under which the budget must be balanced. Consistent with some readings of our Constitution, true limited federal government would only finance the defense of the country and a federal judiciary. In which case, the clause in the BBA could state income taxes are voluntary, and the budget must be balanced under that constraint.
The current appropriations process almost guarantees ever-higher levels of spending. The favored mechanism has become passing an omnibus spending bill that is too large to be read before passage. It becomes filled with special interest spending. No item is debated on its own merits. Instead of this approach, individual appropriations bills should be required. This reverts to the old mechanism where every spending item is scrutinized for its own worth. The public has time to weigh in and apply pressure on elected members of Congress to vote against unfavored spending. It is precisely for the reason of avoiding accountability that Congress migrated away from individual appropriations bills to omnibus spending bills. Reverting to single appropriations bills likely is the single most effective way to gain a balanced budget.
Related to appropriations, politicians have enacted a mechanism to ratchet spending up. This is baseline budgeting. It is assumed that every spending item will be increased by the rate of inflation automatically. The irony is that government causes inflation by the Federal Reserve’s loose monetary policy. But, politicians want to dodge accountability for voting to increase spending. So, they invented this mechanism. Baseline budgeting should be eliminated. If the government sanctions inflation by the Fed’s policies, then politicians should answer to constituents why they are voting to increase spending.
Currently, the Federal Reserve is out of control because there are no audits of their actions and no one holds them directly accountable. The current Fed monetary practice targets positive inflation levels which is intentionally destructive of the value of the currency. The portfolio of the Fed has grown to record levels and includes both government and private debt instruments. By purchasing government bonds, the Fed manipulates interest rates to stay below what the market would dictate. In conjunction with the Treasury, current Fed policies are supportive of Congressional deficit spending and payment for Endless Wars. This enables credit expansion and causes the credit-based boom and bust cycles of which we’re in the boom phase now. Such monetization favors the wealthy who can buy stocks and real estate and happily experience inflationary results. Later, the effects of this monetization cause inflation experienced by the poor and middle class with higher prices at the supermarket, gas pump, clothing store, hardware store, car dealership, and housing market.
On the other hand, if the Federal Reserve charter were to be changed to only support the stability of the value of the dollar, then things would change and change quickly. Interest rates would rise because the market would be allowed to function. After decades of disincentives, savers would be encouraged. This would aid the elderly and poor and middle class. As a result of increased savings, funds available to entrepreneurs and successful businesses would increase. On the other hand, zombie businesses and businesses unable to provide goods and services customers that want will go out of business or have to be re-organized. This frees up resources to businesses making goods and services people want and would provide better and more stable employment for workers.
The fourth and last condition Republicans should require to raise the debt ceiling is agreement on limited government. This is consistent with our Constitution which grants the federal government only limited and specifically defined powers. To support raising the debt ceiling, elected Republicans should demand elimination of particular programs, offices, agencies, and departments. As is well known, politicians think reducing the funding of a program means reducing the growth of the rate of increase in spending for that program. Consequently, voters should demand elimination of particular government spending. Candidates for elimination of spending include Planned Parenthood, the Department of Education, Department of Health and Human Services, Department of Housing and Urban Development, Department of Energy, Department of Homeland Security, Environmental Protection Agency, the National Endowment for the Arts, the Corporation for Public Broadcasting, the World Health Organization, the United Nations, and privatization of the Transportation Safety Administration.
It is no coincidence that progressive fascism has been implemented in the United States and is becoming more ubiquitous. Elected politicians have voted for bigger government and Leviathan has grown large indeed. Liberty and prosperity are incompatible with big government. Elected Republicans have a great opportunity to leverage their current minority positions and powerlessness into majority positions and power with upcoming elections. The base can be energized with important reasons to return Republicans to power with devout specific promises to act to make government much smaller. By dedicating themselves to liberty and prosperity anchored in much smaller government Congressional Republicans can continue what President Trump started causing a historic realignment of the poor and middle class into the Republican party. Obviously, Democrats won’t agree to any of these conditions, so let them raise the debt ceiling by themselves.
Whitson G. Waldo, III is a capitalist, a venture capitalist, and master and skipper of a 43-foot monohull sloop sailing vessel.
Image: Pixabay / Pixabay License
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