Mr. Sensitive

January 18, 2013

The United States Is Bankrupt

Filed under: Uncategorized — lbej @ 10:37

Forget the debt ceiling.  The debt ceiling is nonsense, and is not a constitutional mandate in any way.  This is in contrast to the validity of the national debt itself, which, per the 14th Amendment, “shall not be questioned.”  It is far more illegal for Congress to force default on the Constitutionally-guaranteed national debt by refusing to raise the arbitrary debt ceiling than for the Treasury to bypass Congress and issue trillion-dollar coins to make interest and principal payments on the existing debt.  That’s what we’re talking about: not new spending—which Congress would, indeed, have to authorize—but payment of existing obligations, most of which were incurred as a consequence of policies begun under the previous REPUBLICAN president.  The budget was in surplus when Bill Clinton left office.  The Bush Administration waged two multi-year overseas wars and expanded Medicare with a multi-trillion dollar drug benefit program; naturally, Americans were asked to bear the burden of these necessary policies by paying higher taxes.  Ha ha, no.  Instead of raising taxes to finance our war of self-defense in Afghanistan and our war of insane Imperial overreach in Iraq, Bush pushed through trillions of dollars in tax cuts!  Now, let’s leave aside the question of justification or lack thereof for any or all of these decisions.  What can’t be disputed is that dramatically higher spending coupled with dramatically lower revenue created enormous budget deficits.  What also can’t be disputed is that when the government spends more money than it takes in, it has no choice but to make up the deficit by borrowing.  Thus the $16 trillion national debt is the result of a more than a decade of unfunded spending on a scale that dwarfs the Great Society/Vietnam War double-whammy Lyndon Johnson hit us with in the 1960s.  The Republicans want to make the debt ceiling issue a debate about spending going forward, when that’s not what it’s about, at all.  It’s about paying for the badly-managed Afghanistan War, the idiotic invasion and occupation of Iraq, and the backdoor subsidization of drug company profits that we call Medicare Part D.  Bush refused to pay for those things, and the Republicans said nothing.  Their arguments about cost-cutting now are dishonest and morally bankrupt.

Speaking of bankrupt, that’s where we now find ourselves, and it doesn’t really matter which party we want to blame for getting us here.  We owe $16 trillion dollars, and we don’t have $16 trillion dollars.  We have three options, as I see it: take the money from the evil multi-national corporations; print the money; or default.  The first option—my incendiary rhetoric aside—would be challenging from a technical standpoint, to say nothing of its political prospects.  U.S. multinational corporations have shifted their manufacturing capacity to low-cost Asian nations (China, Taiwan, Vietnam), preserved a hollow U.S. legal and marketing identity in order to sell into the consumer-driven, cheap-credit-fueled U.S. market, and reaped profits on the order of trillions of dollars.  The U.S., European, and Chinese governments are all complicit in this system and have used fiscal, trade, and monetary policies to support it.  We could, as a nation, demand that those policies be abandoned or reversed, using a combination of tariffs and taxes.  This would destroy the global economic system, and we could then, theoretically rebuild something more democratic and far more transparent.  But what would probably happen is something like what happened last time economically-interdependent world powers blew up an imbalanced system.


So we shouldn’t do that.

The second option is printing more money, lots more.  This would destroy the value of the dollar, shut down global trade (most of which is dollar-based), and produce staggering inflation in the U.S.  This is essentially what Germany decided to do in the 1920s when it was unable to pay the reparations it owed the victors of World War I, and you know what happened next.


So we shouldn’t do that, either.

What we should do is inform our creditors that we are unable to pay and will need to restructure our debt.  An argument could be made that much of that debt was incurred through policies that benefitted the rest of the world.  China buys our Treasuries in order to manipulate their currency—they’ve needed us to issue more and more debt so they can keep the value of the yuan low and their trade surplus high.  So Beijing has to play ball.  What about our military spending?  The eradication of al Qaeda is certainly something that benefits the entire civilized world.  The Iraq War is on us, sure, but what about all the troops we station around the world to hold rogue states (Iran and North Korea) and potential rogues (Russia and China) in check?  We’ve funded much of the distributed defense system that has provided the basis of security and prosperity in Europe and Asia for decades.  Let’s just agree—you don’t bill us for Iraq and we won’t bill you for the Cold War.

If we get $5 billion in write-downs from Europe, Japan and China, our position is suddenly much more tenable.   I say we start there.


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