Why the debate over the Debt Ceiling?

Discussion in 'Politics' started by Richard-H, Jul 20, 2011.

  1. Richard-H

    Richard-H Gold Member

    Aug 19, 2008
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    An interesting section of the Constitution states:

    Article VI
    1: All Debts contracted and Engagements entered into, before the Adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation.

    Apparently, the founding Fathers believed that in order to maintian a stable society, it was mandatory the those who invested, even in a failure, should be paid back, so they took ownership of the debt that had been owed under the articles of Confederation, even though this debt was not owed by them.

    Since the founding of this country, we have accumulated debt, sometimes paying it off, sometimes not. But at each and everytime that debt seemed to be enormous - as much as 140% of GDP just after WWII.

    United States public debt - Wikipedia, the free encyclopedia

    Ronald Reagan's primary campiagn pitch in 1980 was all about the need for a balanced budget and reducing the federal debt - yet he ballooned that debt under his Presidency. Pure politics was apparently his only motivation.

    What's more, if you review the history in the wikipedia article above, you'll notice that boom times always occured when the deficit increased and economic downturns when the debt decreased.

    I know that it's anti-intuitive, but has it every occurred to anybody that maybe Federal debt is a GOOD thing? Possibly a REALLY GOOD THING?

    Could it be that the whole position of fiscal conservatives - always insisting that a large Federal debt is very, very bad is just plain WRONG?

    What is Federal Debt?

    Basically Federal Debt is the money that the Federal government borrows from other sources. In return the governement issue 'Securities' which eventually pay back the borrower more than they invested.

    That's the key word 'invested'. Nobody 'loans' the government money, people 'invest in securities'. If the government was a public corporation, bonds would be the equivalent of stock in the corporation, and the amount of money owed by the government would be viewed as the amount of money invested in that corporation. We'd consider that corporation to be a top notch blue plate stock.

    $14T voluntarily invested in the U.S. government...by private individuals, corporations, forgien governments...even those we view as potential enemies.

    What is this money used for? Offsetting taxes. $14T is the amount of money that the Americans HAVE NOT HAD TO PAY IN TAXES, while still getting $14T additional government services. (Like winning WWII or fighting off Communism).

    To date, investments in government securities has alway been a highly secure, though low
    return investment. Security is a wonderful thing. $14T can't be wrong.

    So, historically, Congress has always, very routinely, been willing to increase the debt ceiling...the equivalent of corporations issuing new stock, but without the problem of dillusion. Anything else would be idiotic.

    If debt was truly bad, then the federal debt would have destroyed this country long ago. Given the present $14T, we would all be living in poverty. But we're not, now are we?

    Why does this work? Because the reality is, we have no possibilty of forgein invasion, we have the strongest military in the history of civilization and we have the largest economy.

    We are, in real terms we are very, very secure. Just as long as there is never an idiotic Congress that refuses the raise the debt ceiling.

    I would ponder that we could remove all debt ceilings, let the federal debt grow ad infinitum, keep all federal programs plus add any that we'd like, and lower taxes so that taxes only had to pay the interest on the federal debt and NOTHING else.

    Sound like a Ponzi scheme? Yes, but it's one that's been working for 200+ years.

    Of course the Chinese would be upset...without a U.S. government default... they would never have a chance of becoming the world's currency reserve or the world's predominant economic power.

    And if the Chinese are upset, you can bet that the Tea Party will pitch fits!

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