Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter


Raising U.S. Debt Ceiling Spells Economic Disaster

Interest-Rates / US Debt Apr 22, 2011 - 08:39 AM GMT

By: LewRockwell


Best Financial Markets Analysis ArticleJeff Scribner writes: Nero fiddled while Rome burned. The President and the Congress are playing political games while the national debt grows to out of control proportions. We should hold the government’s feet to the fire and force an end to spending using borrowed money. An opportunity to do this will arise in a month or so.

In April, almost seven months after the start of the fiscal year, Congress finally passed the FY 2011 Federal Budget, nominally $38 Billion (about one percent) less than the proposal by the President. Two things are significant here. The first is that this is the first budget for FY 2011. Congress has spent money from the beginning of FY 2011 (01 October 2010) until mid April by "continuing resolution" in the absence of any budget. The second important point is that the 2011 budget, with the aforementioned $38 Billion reduction, spends more money than was spent in 2010. It is still in deficit. It has been adding to the national debt all year through continuing resolution and will continue to add to the debt for the rest of the year via the budget that was finally passed.

The House of Representatives has also passed a "Budget Blueprint" prepared by Congressman Paul Ryan, Chairman of the House Budget Committee. If all spending and receipts outlined in this document are implemented by the House and Senate and are then signed by the president, spending will be reduced by about six trillion dollars and the deficit will be reduced by about four trillion dollars over ten years. Do you really believe that this will happen? Even if it does, the Federal Government will continue to run deficits and add to the national debt for the next ten years, albeit at a slower rate than the present.

What does this tell you about the difficulty in reining in the runaway spending that has become the habit of Congress? It tells me that something a lot more drastic has to be done to get a grip on Federal spending and to stop adding to the debt immediately.

It so happens that there are just about enough votes in the current House of Representatives to prevent an increase in the debt ceiling. If the debt ceiling is not increased, there will be bigger spending cuts in the 2011 budget and the 2012 budget and every budget after that because we are very close to the debt ceiling. If the debt ceiling is not increased, money cannot be spent that would raise the debt over that ceiling. Deficit spending would end immediately. Congress will be finally forced, at least for a little while, to allocate austerity rather than funding their favorite expenditure with borrowed money.

The voters could then decide whether to re-elect those who voted to increase the debt ceiling or those who tried to be responsible and voted not to. Some people are saying that failure to raise the debt ceiling will cause a catastrophe. If that happens, the voters can consider it. What if there is no catastrophe – just a lot less spending? The voters can consider that, too. Some big spenders are claiming that failure to increase the debt ceiling will cause a recession. We have managed to get into a recession and sustain it while adding to the debt every minute. Deficit spending has not prevented a recession. Moreover, there is reason to believe that not extending the debt limit will actually be good for the economy. Government spending will be curtailed. Some government services will also be curtailed. This provides fertile ground for more free enterprise solutions, more little companies, more employment in the private sector and more GDP growth. Why should we believe those who say increase the debt ceiling or suffer a recession?

Using the FY 2010 numbers above we can see that in order not to create more debt, Congress would have to hold spending, including debt service, to $2,162 Billion. Congress would have to cut $1,294 Billion from FY 2010 spending levels to do that. Where would you cut?

We can fund Social Security and Defense without borrowing. However, the first call on available funds would have to be servicing the current debt. We might have to change Medicare and Medicaid along the lines suggested by Paul Ryan and we would have to be very careful about everything else. Wouldn’t this be a good thing? Just think, after a few years, Congress might actually start to think about surplus budgets to pay down debt and gain spending flexibility from lower debt service costs.

Finally, since Congress will never cut spending enough to balance the budget, it is necessary to force that action via refusal to increase the debt limit. There is no time like the present to do this.

Jeff Scribner [send him mail] is President of ASI Enterprises, Inc., an investment bank serving small and medium sized businesses.

© 2011 Copyright Collin Moshman / - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


22 Apr 11, 15:54
sensible choices

Congress nor the president will do anything other than kick the can as far down the road as possible. Until we are on the precipice of disaster and there is a public outcry, nothing will be done other than to spend and borrow. Sadly, that time is fast approaching. There really isn't anything one can do about it any longer other than to prepare for yourself and your loved ones.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules