An Easy Solution to the Government’s Debt-Ceiling ImpasseRobert Higgs • Thursday July 14, 2011 7:42 PM PST •
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.