Oh, wait. I suppose I ought to explain who Paul O’Neill is. A decade ago, he was President Bush’s first Treasury secretary. I have no very clear memory of him except that he toured Africa with Bono and they were photographed in matching tribal dress looking like Colonel Qaddafi’s Mini-Me twins at a Tripoli sleepover. Other than the dress-up fun, I’ve no idea why they were in Africa, but you paid for it, so I’m sure there was a good reason.
Anyway, Secretary O’Neill popped up the other day on Bloomberg Television to compare debt-ceiling holdouts to jihadists. “The people who are threatening not to pass the debt ceiling,” he said, “are our version of al-Qaeda terrorists. Really.”
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Really?
Absolutely.
“They’re really putting our whole society at risk by threatening to round up 50 percent of the members of the Congress, who are loony, who would put our credit at risk.”
But hang on, generally speaking, when you hit your “debt ceiling,” your credit is at risk. If you’ve got a $10,000 credit card, and you run it up to the limit, but you need a couple more grand right now, pronto, because you outspend your earnings by 50 percent every month and you have no plans to change that anytime soon, well, the bank might increase the limit to $15,000, or $20,000. Or they might not. There is a question mark over your credit because there is a question mark over your credit worthiness: It is at risk.
Paul O’Neill seems to regard that attitude as unhelpful. So does Timothy Geithner, his successor at what is still laughingly known as the United States Treasury. Secretary Geithner says that even to be discussing the debt ceiling is “a ridiculous debate to have.”
Ridiculous?
Absolutely.
“I mean, the idea that the United States would take the risk that people would start to believe we won’t pay our bills,” continued Geithner, “is a ridiculous proposition, irresponsible, completely unacceptable.” The best way to convince people to believe we’ll pay our bills is to borrow up to our limit, and then increase the limit and borrow a whole bunch more. This would be the 75th increase in the debt ceiling in the last half-century. Let’s just get it done, and resume the party.
But if Geithner thinks that even discussing the question is “ridiculous,” then, as my colleague Jonah Goldberg put it, why have a debt limit at all? What’s the point?
Well, because it gives us more credibility with our creditors, right? Even if we set the debt ceiling way up in cloud-cuckoo land to a bazillion trillion gazillion dollars and 83 cents, even a debt limit entirely unmoored from reality still gives the impression we haven’t quite flown the coop.
Yes, but why does the U.S. government need to maintain credibility with its creditors when increasingly it’s buying its debt from itself? Every month there’s more and more U.S. Treasury debt and fewer and fewer people who want it. The Chinese are reducing their exposure. The investment behemoth Pimco, which manages the world’s largest mutual fund, recently dumped U.S. Treasuries entirely. To avoid the failure of U.S. bond auctions, or an increase in interest rates to make them more attractive to rational lenders, the U.S. government’s debt is bought by the U.S. government’s Federal Reserve.
I tried up above to come up with a real-world comparison for the debt ceiling — imagine you’ve got a credit-card limit of 10K, etc. — but it’s harder to do that with the Fed’s policy: Imagine your left hand issues an IOU to your right hand in return for an e-mail with a large number on it . . . oh, never mind, it’ll only make your head hurt. “Quantitative easing” is extremely quantitative if not terribly easing, so raising the debt ceiling would enable us to issue more debt for us to buy from ourselves. You can see why Secretary Geithner thinks that’s a no-brainer.
I wish conservative politicians could make their points as clearly. I also wish politicians had points to make. Which may be a part of the problem. Once you're a bureaucrat, you think bureaucratically.
Steyn is probably on to something noting that for every $1 of taxes, we spend $2. More revenue, if that were possible from higher taxes or from any other royalty, does seem to encourage bad behavior. It couldn't be more deliberate if it were deliberate.
By this formula, one would be tempted to reduce taxes thereby reducing spending. But this is a "heads we win, tales you lose" game.
Actually, it's "heads THEY win, tells we lose." More than anything else, we the people (conservatives, libertarians, anarchists and, at the low end of the human scale, liberals) lose while they the control class win. Every government time. They even have alternative governments (called Rebpulican and Democrat in this country)to maintain the control.
(PS This CAPTCHA thing is rather punitive isn't it?)
For all his demagoguery, it's important to remember that only Geithner can actually cause a default, as he decides what bills get paid first. True, hitting the debt "ceiling" would make his job harder, but no one forced him to take the job. I suspect, however, that he'd rather spend his time simulating (misspelling intended) the economy than doing his job.
The debt itself is really a misnomer, since most of the "debt" involves percieved wealth assigned to certain constituencies under dubious rules. Mark Steyn has it correct when he says we need debt relief from ourselves. The issue is that most of the pols are not serious enough to stop the game of musical chairs and the 47% who think they can vote themselves a seat play along.
Lots of sound and fury, no significance. Much like Obama's grandstanding when he was in the Senate.
The debt ceiling will be raised because it has to be. At some point, the Republican Party's corporate bankrollers will bring the hammer down on this nonsense.
Thanks, Mark, for another article which states the case in such clear terms. How can Washington (the libs mostly) ignore the cliff we are heading for at 200 mph? I'm still hopeful the conservatives will unite behind Paul Ryan's plan and do a good job of getting the message out. America really cannot take another term of President Obama and maintian any significance in the world.
Coach, the goal of the Control Class is indeed to have full control of society, just as the nomenklatura did in the USSR. By driving the United States to bankruptcy Mr Obama and his tax-cheating designate are hastening the day that we become, as I am so fond of saying, a socialist weenie nation.
Pundits marvel at the lack of thought and understanding of the world shown by the BHO regime, but they have it backwards. There is no bad judgement or lack of insight here; it is much simpler to conclude that the BHO regime's drive to national bankruptcy, like virtually all other aspects its policies, is a deliberate attempt to destroy American capitalism.
"... people would start to believe we won’t pay our bills,” continued Geithner ..."
Bollix!!
I am waiting for one honest man in Congress (I know, a very hot place will freeze over first) to point out to this economic booob (sic) and in front of the cameras that increasing our debt does not pay our bills.
Paying the bill means eliminating all or a part of the debt.
Digging ourselves deeper into the hole is not going to get us out of the hole.
Geithner's statements are so moronic that I simply have to believe that he knows the truth and is just spouting this drivel because most people simply do not realize how wrong it is.
I'm trying not to be disrespectful of Mr. Steyn or others that enjoy commenting here. However, economics and geopolitics is something I have been acutely aware of and studying for the past 25 years.
In 1986 I wrote a thesis that predicted the absolute decline of America will occur in 2017. I based this theory on rational calculation of repeating past historic data and attributing empirical probability as opposed to theoretical probability to continue forward until such time it was deemed unsustainable or would preclude any possibility of its continuance.
As Mr. Steyn correctly points out, the government has raised the debt ceiling 75 times in the past 50 years. However the debt ceiling problem began in 1917. From 1917 to 1939 debt was divided among a variety of separate balances and accounts of federal government budgets. In 1939 they were all simply combined or aggregated into a single public debt. This was the year that removed the President and Congress from annual fiscal responsibility and gave that authority in large part to the Treasury. At that time our debt was $40 billion and our debt limit was $45 billion.
The debt ceiling was raised several times to $275 billion to pay for WWII and remain roughly this way with minor increases and decreases until 1962.
My thesis in 1986 was due to the Alan Greenspan Commission in 1983. Since that date and the changes that were made, it was predictable by 1986 that we would hit a total debt spiral in 2017 due to the ever growing debt held by government.
The problem as it stands now will require debt ceiling increases exceeding $1 trillion dollars a year, each and every year into the future, at ever growing amounts until such time the typical citizen comprehends it is an inevitable collapse, and I stand by my 1986 position that will occur in 2017. At such time a global economic collapse will occur, and this will precipitate a literal one world monetary system, one world government, and a potential end to all previous global independent nations.
If anyone thinks that all of the pieces are not already in place for the paradigm shift, you are simply ill informed. The only thing necessary to complete the process is the total collapse of the US economy via unsustainable debt, at such time this becomes obvious and we default, so does the global economy as a result.
China will collapse economically as they will lose their global market as everyone loses their economic stability. This has been by design since at least the late 60's.
This obviously raises many questions, of which I have many answers, but this format is not conducive to have the debate on complex issues.
Thanks Mr. Steyn. Tremendous as always. You question,
"...why not borrow $3 trillion and make even more Americans dependent?"
That is exactly the lib-progressive redistribute the wealth thief's plan and goal...to turn our countrymen into "pray at the altar of the state entitlement dependent weak candy-as* all-too-human herd animals" complete with the wretched spirit of resentment.
It happened in Europe, as Nietzsche predicted (too funny), and it is happening here (really funny)!!!
It won't happen here as it did in Europe, for the very reason we began our country in the first place. By withdrawing our freedom and liberty that was on loan to the King of the British Empire via the Parliament of Great Britain. We engaged in a process described by John Locke in 1688 with his Second Treatise of Government, on which the acts of the American Revolution were based.
The natural state of nature is claimed that each individual is equal in freedom, liberty, health and where all power is reciprocal and equal. This is how natural humans would live without any form of government, everyone is the King but there is now way to enforce justice or morality, so anarchy would ensue.
This is what happens the minute the people rise up and reject their government as in the American Revolution, Libya, Syria, Egypt etc. However it usually involves a physical war of some type, just as it did in our own revolution from Britain.
People of reason understand the natural state is undesirable so they sacrifice some of their freedoms and liberties and place it in the hands of a society or government. The government is to provide security and protection in common with the majority and ensure individual property and possessions are safeguarded from within and from without.
After such period of time the King, Parliament, Congress, Dictator, or whoever is in charge of providing such protections of the majority is deemed to have enslaved or abused via oppression of the majority, the state of nature provides that the majority will reclaim their total freedom and liberty they had sacrificed and entrusted to said government. Thus rejecting the authority of the government and after such time as revolution or whatever means accomplishes dissolution of the government, the need to replace it with something better ensues, as you can't remain in the state where each individual is responsible to secure and protect themselves and their property.
Although many government leaders around the globe believe in a one world government, it is the majority of people that will decide their fate, not governments themselves, as governments have authority on loan. The real power of society, even in dictatorships lay within the majority of people of the society, not the dictator, nor the President and Congress.
Once the majority of Americans have had enough of our government to the degree they feel either enslaved by it or oppressed by it they too will come to realize they have the authority to reclaim their individual freedom and liberty and remove the authority of our government over us. This would precipitate yet another form of government that would attempt to once more do the will of the majority as opposed to force the majority to succumb to the will of government.
It is worth noting that our military is an all volunteer force as opposed to those of a dictator, so the chance they would support government against the majority is minimal to none.
We grow nearer to this possibility as debt mounts and regulations and demands placed upon the people to comply grow more invasive and mandatory. At the point the typical citizen feels owned by government as opposed to government supporting the majority, this dissolution of government becomes possible at any time.
So what? Didn't tell Cheney preach us, "Reagan has showed that budget deficits mean nothing." Are you willing to overturn Cheney's sagacious views on fiscal profligacy? In 2001, the gross debt was 5.8 trillion, and in 2009 it was 12 trillion. Where was all this talk of reining in our debt back then?
Fantastic as always, but this shouldn't be so hard, Mark:
"I tried up above to come up with a real-world comparison for the debt ceiling — imagine you’ve got a credit-card limit of 10K, etc. — but it’s harder to do that with the Fed’s policy:"
Isn't the real-world comparison obvious? We're paying off one set of credit cards with another.
Only unlike when most Americans do that trick-- they tend to pay off a high-interest rate card with a low-one-- Uncle Sam is doing it backwards, and risking *higher* interest rates in the future.
Eventually, the credit cards run out, and you're stuck with hideous debt AND horrific debt service... and absolutely nothing left to borrow.
I think a real world equivalent would be a stock split. Except instead of sending you a new share to match each share you own, they keep and spend each new share while the shares you still own are worth half as much.
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