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Don’t Raise The Debt Ceiling- LOWER It!

FranklinDoes the debt ceiling debate seem familiar? It should. From the Carter administration to the Obama administration the debt ceiling has been raised 39 times. Each time the increase was opposed but then passed by the opposition party.

It’s like a political variation on the silent movie drama in which the poor damsel says, “I can’t pay the rent,” the villainous landlord demands, “You must pay the rent,” and the young hero declares, “I’ll pay the rent.” In the political version, the parties take turns playing the villain.

The recurring drama over the debt ceiling would be amusing if it did not increase the national blood pressure, frighten Wall St., and decimate stock portfolios. But it does all that. And worse, it distracts us from the nation’s real and growing problem—profligate spending.

So how do we end this tiresome drama? The first step is to dispel the mythology it is based on.  The idea promoted by whichever party wants the debt ceiling raised is that without such action the country will be forced to default on its debt.

That is like saying if the bank doesn’t increase your credit card limit, you won’t be able to pay your bills. This might be true if the only income you have is what you borrow on your credit card. But that is seldom the case with credit card holders and it is definitely not the case with the federal government, which could easily pay the interest on its debt from the more than $200 billion it receives every month in revenue.

If the debt ceiling need not be raised to cover existing debt, why are politicians so intent on raising it? Because they want to keep on borrowing and spending money. For an illuminating image, think of a spoiled child stomping his feet and screaming, “I want my own way.”

What alternatives are there to raising the debt ceiling? One is to eliminate it altogether by repealing the law that established it. That may sound crazy but it is recommended by Thomas Sowell, a highly regarded scholar, and reportedly supported by former Fed Chairman Alan Greenspan and former Treasury Secretary Paul O’Neill.

Another alternative is to lower the debt ceiling over a period of time. Mark Thornton of the Mises Institute recommends this approach, arguing that it would force Congress and the White House to be more responsible in spending and this in turn would stimulate the economy.

Which alternative is better may be debated, but either would be preferable to raising the debt ceiling because both would have the effect of reducing debt. And that would be a good thing, for as Benjamin Franklin said and our government has been demonstrating for over a century, “He that goes a-borrowing goes a-sorrowing.”

Lowering or eliminating the debt ceiling is only the beginning, of course. Government needs a strategy for substantially reducing the factor that increases the debt, the annual budget deficit, which the Congressional Budget Office forecasts to be $642 billion. Here’s the dilemma. Any proposal for cutting anything prompts politicians who support the expenditure to cry foul and create images of elderly people being pushed off cliffs or reduced to eating dog food.

So the solution is not to cut this, that, or the other thing. It is to cut everything! The approach known as “sequestration” was a flawed attempt to do this. The very term sequestration is an impediment to understanding. (Historically, to sequester means to set apart or seize, neither of which the government’s approach does.) Whoever concocted this name should have consulted a linguist, an advertising copywriter, or both.

Numerous substitute terms come to mind, for example cutting costs, eliminating fraud and waste, saving taxpayers’ money, and streamlining government. Unlike sequestration, these terms are readily understandable and evoke a universally positive reaction. Moreover, they describe real needs.

According to data reported by Eric Schnurer in The Atlantic, federal programs as a whole could save about $300 billion each year by eliminating fraud, and eliminating waste could significantly reduce health care expenditures.

In addition to controlling fraud and waste, federal agencies could realize substantial savings by eliminating redundancy and inefficiency in federal departments. It is axiomatic in industrial engineering that when such efforts are initiated in private businesses, savings of at least ten percent are virtually guaranteed. The savings are likely to be much greater in government, where there is seldom any incentive for cost containment.

It is pointless to ask administrators whether they can find any ways to save money—their answer would obviously be “Sorry, we can’t find a thing to cut.” Instead, the program should mandate a cut in every departmental budget—say, 1 percent a year for five or ten years—and let the administrators figure out where the cuts should be made. This much the sequestration approach has tried to do, but it failed to make this vital stipulation:

Because inefficiency occurs in the administration and operation of programs, it cannot be corrected by reducing the benefits to those served by the programs. Therefore, all cuts made for purposes of efficiency are to be made in staff positions, salaries, expenses, and equipment.

Administrators with little or no experience in the real world outside governmental bureaucracy will understandably be at a loss to figure out how to increase efficiency and thereby reduce bureaucracy. They will therefore need guidelines such as these:

  1. One of the most common ways bureaucracies grow is by the proliferation of “assistant” and “assistant to the assistant” positions. Therefore, an appropriate way to begin the efficiency program is to eliminate most or all of those positions. (Suggested motto: “If you can’t do the job without an assistant, you probably aren’t the person for the job.”)
  2. After taking office, assistants tend to justify their positions by creating work for those beneath them—daily or weekly reports, etc. which they then pass on to their superiors as evidence that they have accomplished something. Once the assistants’ positions have been eliminated, all the make-work projects they have forced on their subordinates should also be eliminated for added economy.
  3. Bureaucrats who have assistants are considered more important than those who lack them and thus are often granted special perks—for example, a higher salary, a bureau vehicle, in some cases a chauffeur, first-class travel, etc. As assistants’ positions are eliminated, the importance of their superiors will be diminished, so their perks should be reduced or taken away.
  4. Because 21st century conferences can be held online, there is no need for having people in government agencies travel even to moderately priced convention locations. By using a service such as Go to Meeting, as many as 1000 people can attend multiple conferences for a total cost of under $1000 per year. All departmental budgets should be reduced to reflect this economy.
  5. Generally speaking, the more people that are purposefully engaged in an activity, the better the results. Therefore administrators should enlist their subordinates in the task of producing ideas for increased efficiency, and perhaps even offer appropriate monetary prizes for the best ideas—the greater the annual saving, the more generous the prize.

It doesn’t take a great deal of worldly experience or intelligence to realize that, for a nation as for an individual, living beyond one’s means is not only undesirable; it can also be financially disastrous. The sooner our elected officials understand this, the sooner they will put aside political diversions and work together to streamline government, reduce the national debt, and restore America’s economic strength.

Copyright © 2013 by Vincent Ryan Ruggiero. All rights reserved