Friday, October 18, 2013

Shut Down and Debt Ceiling

Recently, the United States government was shut down for a few days, causing worry all around the world and warnings of the most dire consequences and even total economic collapse across America and then across the globe if the government was not re-opened and the debt ceiling raised. Because that is what the stand-off came down to; raising the debt ceiling. The provocation, of course was the “Affordable Care Act” aka “Obamacare” which the Republican-controlled House of Representatives did not want to fund. The Republicans passed a bill funding absolutely everything else, the entire Democrat wish-list that Republicans despise -everything; except for “Obamacare”. Obviously, this was a case of the Republicans being totally unreasonable. Sure, they were planning to give Democrats 99% of what they wanted but, you see, everyone knew that it was that remaining 1% that was most important to the Democrats and President Obama because, well, it was about the only thing they managed to accomplish during those first few years when they had control of the entire government -and even passing that took more than a little bribery. It was an ugly, painful, difficult process but the Democrats got “Obamacare” passed and (thanks to a George W. Bush appointee) approved by the Supreme Court and it did not matter if the Republicans voted to give the Democrats everything they have ever wanted or will ever want until the end of time, if “Obamacare” was not included, they were not going to play ball.

Most Republicans, however, did not think “Obamacare” was a hill worth dying on. With the Democrats controlling the Senate and the Presidency (and probably more importantly the media) they knew that giving the Democrats everything they wanted except “Obamacare” would be seen as the Republicans being totally unreasonable. If it had been down to that issue alone, the Republicans would not have lasted even as long as they did. The debt ceiling, however, is an issue where the Republicans start to look a little more ‘grown up’. The shut-down was really over that and it was only when the Republicans finally agreed to raise the debt ceiling that the government was re-opened and everyone and all the markets around the world breathed a sigh of relief. Yours truly, however, was not among them. The government shut-down was a bit of a joke in the first place anyway. I went to the Post Office while the government was shut down and there was no problem. The military was still funded, social security checks still arrived but non-essential workers were given some time off and, for some unfathomable reason, open air national monuments were closed. I have yet to hear anyone explain how it makes sense to close down a monument that is just sitting over there in the grass. In other words, it was not really a shut-down of the government, it was a very, very limited “partial shut down” which Republicans and Democrats tried to use to make each other look bad.

Raising the debt ceiling was the main issue and it comes up regularly and most of the time it is raised with little fuss or fanfare -but it *always* gets raised. This time, for example, a few people pointed out that, as a junior senator, President Obama had voted against raising the debt ceiling when George W. Bush was president, saying that it was downright unpatriotic to keep piling on more debt for future generations. I am not sure which is worse, the idea that the President was being a total hypocrite (as Republicans claimed) by doing this or that the President didn’t really mean what he said back then and was just voting against it to annoy President Bush because Obama is a Democrat and Bush is a Republican. Pick your poison; dishonest and hypocritical or childish and petty. The important point here is that the debt ceiling is raised regularly, it always goes up, it never goes down. Am I the only one who wonders why we even bother to have a debt ceiling if that ceiling can just be raised every single time we reach the alleged limit? Is it just completely insane to even consider the possibility of maybe spending less so that we don’t have to keep borrowing more and more money just to stay afloat? I guess it is.

Anyway, as I said, the partial, limited, sort-of “shut down” did not frighten or bother me. What did bother me was the way the President and people all around the world freaked out about it. The President said that it would cause a fiscal catastrophe if the debt ceiling was not raised and others added to that by pointing to fears in markets all over the world and that if things stayed as they were the U.S. economy would plummet and then, since the U.S. has the biggest economy in the world and the U.S. dollar is the reserve currency of the international community, the whole world would go into a deep financial disaster. Is everyone getting this? Is it just me who is extremely freaked out by all these people freaking out? Am I the only one who finds it just the slightest bit alarming that so many experts are saying that the government of one country being shut down for 16 days could economically destroy the entire planet? If a government being partially shut down for a couple of weeks is enough to bring ruin to the economy of everyone in the world, I think we have to stop and ask ourselves if we don’t have a bigger problem than just Republicans being reluctant to raise the debt ceiling. The people of the world are either being lied to on a massive scale or else nearly every major economic power on earth is living so beyond its means that the planet is resting atop a very unstable deck of cards… balanced on a 2-legged table… held up by a one-armed clown… on a unicycle… resting on a golf ball… I think you get the idea.

Even if it were just the United States of America this would be alarming enough. The total national economy should not be brought to the brink of ruin by the government being partially shut down for 16 days. That should not even be possible. However, it should also not be possible that the United States is over $16 trillion in debt and still able to borrow more money. Does anyone really think that amount can ever be paid back? I doubt it, but most countries are deeply in debt these days even if not as much as the United States (though I think Japan is #1) and this is partly why the rest of the world gets worried that the U.S. might not borrow more money. Everyone seems to depend on it these days. Thanks to extremely generous social welfare programs, most First World countries are so deeply in debt their whole method of thinking about economics revolves around juggling the books, printing/stealing money, borrowing money and just trying to keep everyone calm until they can come up with some new way of delaying the inevitable time when the bill collector appears at the door and no one will lend us any more. It is a little like what some people do on the stock market. Have you ever heard politicians complaining about those “evil” speculators on Wall Street? Well, that’s pretty rich considering that almost every major country is practically surviving on the same sort of system. Just like those people who make millions (and billions) betting on money that hasn’t been earned yet for selling goods that retailers haven’t purchased yet because the products haven’t been produced yet, governments have become accustomed to budgeting funds that haven’t been borrowed yet because they passed up the idea of spending only as much as your government can bring in on its own many years ago.

It reminds me of the story of two neighbors in Louisiana who kept buying and selling the same horse back and forth to each other. One day a stranger came by and offered a ridiculously high sum for the horse and the man sold it. His neighbor came rushing over and asked him how he could have done such a thing saying, “Don’t you realize we were both making a damn good living off of that horse?” The sad thing is, that story was meant to be a joke but today, entire governments are displaying that same level of idiocy. Governments are betting the future of whole populations on things like the rapid growth of the Chinese economy, on China being able to loan money to America and Europe in spite of the fact that most of China is still impoverished, that the Communist Party controls what we know and don’t know about the true state of their finances and in spite of the fact that the very growth of the Chinese economy is working against them. It’s all based on political prisoners, oh, I mean “cheap labor” being able to produce massive amounts of exports at rock bottom prices. Yet, the more successful China becomes, even if just limited to the major population centers on the coast, the more the local public expects and labor prices go up which means many businesses are already looking for new, cheaper labor markets to exploit, oh, I mean “develop”. Why pay a Chinese kid a dollar a day to make $200 tennis shoes when a Cambodian kid will do it for less than half that?

Now, I am sure someone is already asking what any of this has to do with monarchy, because a number of people always seem eager to “catch” me talking about something off-topic. Well, in this case, it does not have a great deal to do with monarchy specifically because monarchies and republics are both capable of making bad economic decisions. However, economics have an impact on monarchy because any time the economy gets bad, the monarchy is always one of the first things to come under criticism in spite of the fact that it has proven to be more cost-effective than a republic. When cuts finally have to be made, I would be very afraid that the British public today would sooner do away with the relative pittance the monarchy costs them before they would scrap the massive money-hole that is the NHS. If it comes down to choosing between anything, even the monarchy, and “my free stuff” from the government, people will always choose their “free stuff”. Of course, there are plenty of other ways governments could and should cut down their out-of-control spending habit but we all know they won’t. Europe as a whole decided to become an American protectorate so they could have a social welfare state which even then they couldn’t afford in the long run but that still didn’t stop them from adding on a whole new level of burden by creating the European Union. Forget finding a way out of the hole, Europe hasn’t even stopped digging. And don’t expect any financial sanity from the United States when someone like Senator Harry Reid refuses to even cut federal funding for “Cowboy Poetry Month”. The Democrats refuse to cut anything and the Republicans only seem to favor spending cuts when they are out of power.

I am afraid I cannot be very optimistic about the direction things are going, on the financial front as well as some others. However, again, I am not ideological about these things, it just seems to me that it should be as simple as not spending more than you make, not getting so deeply in debt to another country or countries that your survival depends on them and just looking at the facts about what works and what doesn’t. If we did that we might see that monarchies such as Liechtenstein, Monaco, the Cayman Islands or the Isle of Man where taxes and regulations are extremely low, business is always booming and the government actually takes in more than it spends -again, in spite of having extremely low taxes. Imagine that. I know a lot of people will say that what works in tiny little countries like that could never work on a larger scale but, given their record of success; couldn’t we at least give it a try? Would it be so unthinkable to at least try moving in that general direction? I think it would, but that’s just me and I am … The Mad Monarchist.

3 comments:

  1. In modern economies, debt is money. A dollar is a piece of debt, not surplus. We can't pay back the debt because that would mean there is no more money in circulation. It's a ruse. Central bankers issue monopoly money and charge interest on it, where do we get more money? From the central bankers. The true sovereigns are the banks not states. The debt ceiling game is petty because it is about funding what has already been approved in the budget. I wish they were discussing not having a deficit (or lowering it) but that happens at budget time. This is more akin to having already hired someone to paint your house, and not having money to do so, you then "take a stand" and refuse to pay them.

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    1. So..."debt is money". Could've just stopped right there. America is the most super wealthy power house on earth then. Everyone can rest easy.

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  2. I respectfully disagree with you regarding Republicans being unreasonable in regards to Obamacare.

    this country is in such that do the Reagan and Clinton not to mention the ongoing unnecessary Middle East Wars. We cannot find everything, we cannot become a socialist society - which we are massively on our way to being. cut have to come from somewhere. it's the Tea Party, and the Senate who are being unreasonable.

    all we are doing is kicking the can down the road and never solving anything. if the US defaults, what becomes of the dollar which is the dominant currency in today's world society?

    personally, I would rather see the Republicans stand their ground against those Democrats and not nothing under regarding Obama care. even if it means that we reach the "debt ceiling".

    I'm sorry to feel this way but, many people in this country thanks that they are due something from the government. what happened to hard work, making your way, and earning what you get?

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