What galls me the most in this entire imbroglio of our debt ceiling is the hypocritical approach of our politicians.
On one hand, you have Congress that authorizes every dollar that gets spent, gleefully accumulating a pile of debt so vast it’s hard to wrap your brains around it.
On the other hand, you have Administrations of all shades who have been eager to borrow and spend as directed by Congress.
Borrowing has been essentially free, and spreading this much money around has made everyone involved rich. To be happy with this system, all you have to do is ignore the disaster balling up on the horizon.
Now, the disaster is increasingly difficult to ignore. The disaster is a historical fact: no country has ever paid off its sovereign debt. Ever. In the history of mankind. All governments default on their debts, either suddenly through outright default or devaluation, or slowly through inflation (the stated path chosen by the Fed). And everyone in Washington knows this.
So why are they playing this game? Why not just state publicly what everyone knows, that government debt is a Ponzi scheme, where you need a constant flow of new investors to pay the earlier investors. And the last investors will end up holding the bag. People wouldn’t mind. We love investing in Ponzi schemes. They make us a lot of money. And when they blow up, well, we know the Fed will print enough money to bail out its cronies and to a lesser extent some of us.
With that admission, the entire debt-ceiling debacle would go away, and we could all go back to work doing what we so merrily did before: borrow and spend. For another day. Because that’s what we’re going to do anyway. Or do you think we’re suddenly going to come up with $1.6 trillion in spending cuts and new taxes a year—40% of our entire federal spending—just to run a small surplus in our federal budget that might allow us to pay off our debt the honest way over the next 100 years?
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.