The big faux debate in Washington these days is whether or not the federal debt limit should be raised. Congress needs to pass a new law each time the government reaches its previous limit on how much money it can borrow. Over the past 70 years, they have raised it more than once a year on average.
In other words, the debt limit is not a limit at all. It’s just a formality. It’s as if you set yourself a goal to have a balance of less than $3,000 on your credit card bills. Then, after reaching $3,000, you adjust your goal to $3,500, then $4,000, and so on. You will eventually reach the credit card’s externally imposed limit. But what’s the external limit on America’s debt capacity?
The government currently owes about $14 trillion. Could they borrow $100 trillion? That’s approximately the total amount of wealth on earth. If everybody sold everything they owned at current market value and paid off all their own debts, they would have about $100 trillion or so that they could then lend to the federal government of America. But if everybody sold everything, who would buy it? The only entity with cash: the federal government. In other words, all of humanity would end up with no property except IOUs from a consortium of politicians. Maybe that’s what they have in mind.
The debt limit game is not confined to either of the two major government parties. Democrats and Republicans alike vote to raise the limit, raise spending, raise taxes, raise troops and raze countries. This year, Republicans are making a big deal over the debt ceiling. But it is a fake argument and not a principled stand — the same way Congress initially voted against the $700 billion Wall Street bailout. Politicians simply try to get the most they can for whoever funds them. Congress quickly voted for the bailout when a myriad of pork projects magically appeared in a revised version. And the Republicans will vote in favor of increasing the debt limit once their lobbyists get paid.
But for us ordinary Americans, the debt limit is our friend. Although the friction it provides against more rampant government spending is modest at best, it is still more resistance than we provide through words or actions or petitions.
Suppose we all write letters to our elected representatives, flooding them with calls to not only refuse to increase the debt limit, but to actually lower it. Following the will of the people would leave the politicians without any money to redistribute to their friends. They would reply with solemn form letters about how they agreed with our values and ideals and would also like to see a smaller, more efficient government, but at this time of emergency, “we” need to raise the debt limit, temporarily, and thank you for your continued support.
Who is “we”? It is not you and me. It is them, the politicians.
Perhaps we, meaning the true, you-and-me we, should insist not just on a lower debt limit, but on a debt limit of zero dollars. It is not we the people who owe $14 trillion. It is the federal government. It is a bunch of empty suits, politicians long since retired or passed away or merely lacking ethics, who have burdened our country. If creditors want their money back, they should talk to those suits. They can’t come after your car or your house. Let the politicians pay off their debt.
And if they can’t, then let them default, and let the creditors come after the assets of the politicians, not the assets of the innocent citizens. Those who argue against a default cry that one of the dangerous results would be a far lower credit rating for the future debt of America. But that’s good! Let’s hope someday the credit rating of America is so junky, because the government is no longer able to seize or steal the assets of its citizens, that no one would ever loan the federal government money. Then they would have nobody to borrow from. And the debt ceiling would be at zero, right where it belongs.
Dr. Phil Maymin is an assistant professor of finance and risk engineering at NYU-Polytechnic Institute. The opinions expressed are his own.