An Easy Solution to the Government’s Debt-Ceiling Impasse
By Robert Higgs | Thursday July 14, 2011 at 7:42 PM PDT
If we credit the reports coming to us from the mainstream news media–and I am certainly not suggesting that we should–the Democrats and the Republicans are locked in a fierce struggle over whether to increase the government’s statutory debt limit. The administration and its supporters in Congress insist that taxes be increased as part of the deal, whereas congressional Republicans insist that taxes not be increased and that substantial spending cuts be made to trim the future stream of budget deficits (i.e., additions to the federal debt). Negotiations have been tense, we are told; the president recently waxed petulant and stalked out of a meeting. Heavens!
Despite the seeming impossibility of resolving this conflict, an easy solution lies at hand, and as a public service, I feel compelled to divulge it, so that the entire matter may be resolved at once and the acrimony put, as they say, “behind us” as we march stoutly toward the Brave New World that awaits us.
First, however, permit me to digress for a moment. For the past thirty years, I have been writing about the undeniable fact that the federal government has grown into a grotesquely bloated monstrosity whose size, scope, and power greatly exceed not only the limits prescribed by the Constitution, but also the limits of what men, women, and children can long endure. If this description was true in 1981–and it manifestly was–it certainly is true in 2011. So, it clearly would effect nothing more than a common-sense, morally compelling, and highly productive step if the government were, say, to reduce itself to its dimensions as of thirty years ago. My personal preference would be to return the government to its size, scope, and power as of 1929, as a first step toward further downsizing, but I do not wish to appear overly doctrinaire, and I am certainly willing to be reasonable. I am aware that some of my fellow Americans oppose such a large cutback, and, fortunately for the sake of compromise, a more generally acceptable solution lies readily at hand.
According to the government’s own budget documents, the government expects to take in about $2.26 trillion (in dollars of 2005 purchasing power) in fiscal year 2012. So, to avoid the necessity of raising the debt limit–and hence the necessity of quarreling about the matter–the government need only reduce its expenditure to that amount. Such a reduction can scarcely be described as draconian, because an expenditure of this inflation-adjusted amount would bring the government back, not to the level of 1981, and certainly not to that of 1929, but only to that of the government’s average spending in fiscal years 2002 and 2003.
All but the youngest children will recall that during 2002 and 2003, we Americans were thriving: the economy was growing, interest rates were dirt cheap, and people with only a faint pulse could secure a mortgage that covered the entire amount paid for a new McMansion. Those were obviously, in retrospect, the Good Old Days. Who can possibly object to going back only a few years, especially when we recognize how fabulously everything was humming along at that time?
This solution does not please me, of course: I much prefer that the government be cut back to the 1929 level, as a first step toward its total dissolution and privatization, in the public interest. But, again, I am not going to act childish in a crisis. The government can resolve its present impasse simply by cutting spending back to the real level it had reached–however outrageous that level might actually have been–just eight or nine years ago. I cannot imagine a more generous and eminently feasible plan, so I am hopeful that everyone will recognize at once its incontestable promise for restoring peace among members of Congress, and hence among all of the other creatures living on this green and gorgeous planet.
Tags: Budget and Tax Policy, Economics, Politics, Taxation, The State, Uncategorized 
Bob, you can’t seriously be proposing a return to the horse-and-buggy days of 2002. That was a very different time. That laissez-faire, Wild West atmosphere of mere two-trillion dollar budgets seemed good at the time, but then came Katrina and the financial collapse. Back in 2002, Saddam Hussein was still in power and the United States hadn’t eliminated the risk of gels and lotions in commercial air travel. No one felt safe in owning a used car because no effective federal program existed to soften citizens’ economic burden by paying them to take these old automobiles out of their hands. Corporations were running amok, as Sarbanes–Oxley wasn’t in force yet. When the White House needed to spy on telecommunications, it had to bother asking the NSA to do so in potential violation of FISA, as such warrantless wiretapping hadn’t yet been fully legalized. Without McCain-Feingold fully in effect, our political process was corrupt. I’m afraid 2002 and 2003 might seem like the golden years to you and me, but we are dating ourselves to long for such a distant past. YouTube didn’t even exist and there had only been two Harry Potter movies completed. You might as well be talking about reinstating the Articles of Confederation.
Anthony Gregory | Jul 15, 2011 | Reply
Somebody give me a button for +1 or “Like” on Anthony’s comment. Excellent.
Rocco Stanzione | Jul 15, 2011 | Reply
Robert,
While I won’t respond in the swiftian fashion of Mr. Gregory, I will say a roll back to maybe 1996 would be a better place to start, and might be easier to sell. After all 1996 was a time when we had a politically polarizing President and a Republican Congress, which had decided to harp on the deficit, and the political class managed to be fiscally responsible ever with its bloated nature.
Beside, much of the “good things” you cite from 2002-2003 where what led us down the path to our current economic misery (at least partial misery as there are numerous people who have done wuite well for them selve the past couple of years).
Then again, I like the 1929 idea. If we could somehow manage that we could simply eliminate the greatest long-term fiscal threats – SSN, Medicare, DOD, DHS, as well as numerous other unneeded federal departments and agencies. The real challenge would then be to encourage state government to not try to fill the void left by the removed federal monster.
Of course at some point we wake up and realize the the administration has created a new agency to study the reduction of federal agencies. We’ll see a report in 5 years, which will recommend adding a new department to preside over the reduction.
Oh well, at least we can dream.
Frank | Jul 15, 2011 | Reply
Frank,
That bulge in my face as I wrote about some of the attributes of the Good Old Days of 2002 and 2003 was created by my tongue pressing against my cheek. Still, one must admit, people loved all of those (as everyone now sees them) portents of doom at the time. That’s the beauty of an artificial boom! It may be unsustainable, but it’s still a boom. The trick is to enjoy it to the max and then die before the bust occurs.
Robert Higgs | Jul 15, 2011 | Reply
The present stall over the budget and debt ceiling is disingenuous political posturing designed to cover the fact that the participants really don’t care about balancing the budget or reducing the expensive debt. Cut to zero all foreign aid. ALL. Abandon the empire. Reduce the overblown military at least by 50% Close foreign bases. Withdraw personnel, military and civilian excepting foreign service officers, from all countries. End all payments to support charities and education. This is just a start.
Bob Kesel | Jul 16, 2011 | Reply
I think that rolling back to 1860 is perhaps more tasty. No Civil War ! No TSA back then either.
99guspuppet
Gus S. Calabrese | Jul 16, 2011 | Reply
Dr.Robert Higgs: 7/17/2011
Reminiscing brings some degree of comfort to the minds of some,to others, discomfort.Agree or disagree on the substance or the nature of the beast that was created,we have no choice,but to move “forward”.We are absolutely forbidden in changing the past. This forward movement may indeed push us over the cliff,but we have no one to blame but ourselves.”We the People” allow,permit,and approve(sometimes by way of apathy),the changes that occure,in changing us forever.
The weak now lead the weaker and those in strait jackets.
Thanking you for your attention to this matter -
James deLaurier | Jul 17, 2011 | Reply
OK Bob, let’s make you Senator Higgs. Will you fall on your sword or propose politically feasible cuts so you can return to fight another day?
Would you cut all programs proportionately or roll back each program to its 2002 level? If it’s the latter, would Medicare Part D have to go? How you gonna sell that?
Warren Gibson | Jul 17, 2011 | Reply
The scope and power of the federal government was much to great in 1929. Remember Prohibition?
Downsize DC | Jul 18, 2011 | Reply
Well, as long as we’re wishing for things that won’t happen, I vote for returning the Federal Government to pre-1913, before the 16th Amendment, the Federal Reserve, and Progressive programs in general set in motion all the things that are currently destroying the country.
Not coincidentally, that was more or less the beginning of the rise of public education – the underlying social cause of so much of the 20th century.
Underlying that, it’s a pity there was no antidote to the doctrines of Rousseau, Hegel, and Dewey that had so much to do with producing all of the above.
The question is: how to get people to accept going from where we are to where we should be. Tragically, no one – yours truly included – has a clue how to do that.
Jeff Perren | Jul 18, 2011 | Reply
Bob–
I couldn’t agree more. Your solution is similar to one I proposed about 10 years ago–”Redlinign the Federal Budget.” In that op-ed I suggested that “the” President (whoever he is) present Congress with a Total Spending Redline (TSR). The dollar value of the TSR would be the exact number of dollars the fed govt. took in the previous fiscal year–”last” year. Then Congress would have to tailor its TOTAL Spendning proposals into this jacket. Of course, it would still be an obscene corruption of what a responsible constitutional government should be doing. But at least it would be a beginning from which we might make progress toward the fiscal health of 1926. Most important, it would be a ceiling that every householder and businessman would understand and approve.
Here’s to the Roaring Twenties!
Richard Timberlake | Jul 19, 2011 | Reply
Why don’t they just not borrow 2 trillion and live on the the two they get in revenue from taxes, then plan to do so for a decade, also in order to pa the debt off at least $10 trillion of it they would have to allocate half of that 2 trillion revenue to all government programs, everyone gets a proportional reduction in budget, but the checks still go out, some of the military still hang on in Iraq or Afghanistan, but very reduced, call on the corporations to take some of their money and pay it towards the debt, not raising taxes, a call for charity, a different survival instinct should kick in, if not then it seems the entitlement mentality will destroy this society and the peace it might like to live under.
I don’t want to live in a trillion dollar government but we have to, why cannot grown men understand this? Should not a trillion dollars buy a great deal of government, we lived for centuries without this kind of excess, alas the world DID NOT END. I call this a bluff, they are phonies, fakes, primadonnas, me generation losers that can’t bear to take themselves away from the mirror for 5 minutes. Also if the troops come back this kind of posturing by the government will only serve to pit the boots on the ground against the suites in the tower, and they make themselves out as ever more obvious targets and reasons for valid dissent will only increase, there comes a point when buying people’s affection converts those people into resent, Iraq comes home to the US, any third world hellhole seems more likely in our very backyards if they keep spending and raising the debt limit....but as an optimist we could be out of this in ten years, but it means living off of 25% of what we have, not blowing 75% of what we don’t have.
They are spoiled rotten mallrats running from store to store buying junk for all their friends, this should be obvious and the credit card needs to be cut up, they need to be put in the time out room, if not now then when? Probably never if the media and the leeches and ticks of debt get their way.
Ray | Jul 20, 2011 | Reply
I vote for 1786 – I am not an anarchist, I could live under the Articles of Confederation
Messianic Theonomist | Jul 21, 2011 | Reply
Prof. Higgs with all do respect I want the debt ceiling raised. This is the “Super Size”
economy...the faster this country has a heart attack the better...have you been to the beach lately? This is America overweight, tattooed, text messaging, high esteemed, self absorbed,
*patriotic bunch of fools.
Tongue-in-Cheek | Jul 21, 2011 | Reply
To Balance the Budget Without Raising Taxes
Cut spending, yes. Increase taxes, no! The answer is so simple that it is embarrassing! Just kill the sacred cows: the phony war on drugs, the phony wars in Libya, Iraq and Afghanistan, the central governments intrusion in the field of medicine and the con game that the Saudis and Chinese are playing with the American people.
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• Repeal Obamacare, post haste….why spend a trillion dollars to buy health care for the 32 million Americans who are currently receiving it for free right now? Simply include the preexisting disease and 26 year old child clauses of Obamacare and trash the other 2300 pages of this pay to play scam.
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• Give current Medicaid and Medicare recipients vouchers and let them purchase whatever health insurance fits their needs…this would cut the cost of these corrupt programs by an amazing 70%. Enforceable, meaningful deductibles and co-pays would return Medicare and Medicaid patients to the real world medical marketplace! And would simultaneously cut the cost of commercial health insurance for the rest of us by 50%.
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• Conduct an auction and sell off all government hospitals….Army. Navy, Air Force, VA, USPHS, CDC and NIH. Then present the involved patients with vouchers, so that they can seek medical care where ever they wish. Private hospital corporations would buy the above mentioned facilities and run them as they should be run. Patients would be required to pay deductibles and co-pays, just like the rest of us!
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• Issue a federal mandate that would allow patients to cross state lines, in order to purchase more competitive health insurance….in other words, break up those BCBS monopolies, like the BCBS scam that Kathleen Sebelius and her trial lawyer cronies ran in Kansas, for years and years.
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• Scrap the wind farm and gasohol programs that our corrupt politicians and their flim flam puppeteers have forced down our throats. These programs are not, and never will be, cost effective. Just another corrupt political pipe dream that will never pan out.
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• Scrap the phony trillion dollar Medicare prescription drug program. This was a tradeoff by Bush and Cheney, aimed at getting old folks’ Brownie points, so that Bush et al not be put on trial for treason vis a vis their phony was in Iraq. Let the seniors buy the safer, much less expensive generic drugs.
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• Tell OPEC where to get off by imposing an adjustable energy import tax. “The less you charge us, the less we tax your products. And vice versa.”
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• Structure gasoline and diesel road taxes so as to encourage the use of our abundant natural gas resources for surface transportation.
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• Remove all unions from all mass transit in America. Tell these people that efficient, privately run mass transit, free of unions, is a matter of national survival.
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• Get the hell out of Libya, Iraq and Afghanistan right now! Station these troops stateside until they can find work in the private sector. And begin the public trials of those politicians who corruptly got us into these hell holes.
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• Call a halt to the phony war on drugs and the corrupt judicial-prison industry that it supports. Make those government judges, lawyers, DEA, Sheriff’s Deputies, FBI, USMS, local and federal judicial employees who are involved in this phony war on drugs…why, make them go out and get real jobs.
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• We must stop this insane prohibition of opiates that empowers the most corrupt of us. Do this and crime in America would plummet by 80%. But then we will have to listen to the American drug kingpins Oliver North, GHW Bush, Hillary Clinton, Stephens Jackson, Don Tyson, Steven Bresky, George Soros and others …but then we will have to listen to these drug kingpins’ puppets whine about the dangers of over the counter opiates! Where did these thugs get their medical education, anyway?
To learn more about the drug kingpins who run this country go to http://www.stopseaboard.net or just search: George Meredith MD Comments
Do these things and bingo, our economy rights itself almost overnight. But continue to follow Obama, Hillary, Soros, Greenspan, Geithner and Bernanke….continue as these swindlers have been leading us, and we will continue our ever accelerating national slide into the dark abyss.
To be sure, the answer is not to increase taxes and nor to further squeeze grandma’s money market funds and CDs. Nor grandpa’s little social security check.
George Meredith MD
Virginia Beach
George Meredith MD | Jul 26, 2011 | Reply