July 15, 2011
First of all, the debt "ceiling" is complete bullshit. Since its creation in 1917, it's prevented additional borrowing exactly 0 times. When we get close, we increase it. In practice, there is no ceiling.
What I find depressing is that the so-called Republican opposition's goal isn't to prevent yet another increase, or to balance the budget and push the debt limit down to $0. It's simply to make an increase more difficult or to make sure there are strings attached. "He still takes my lunch money every day, but I make him walk 3 extra steps. Winning!" Hell, some Republicans don't even seem to care if we keep borrowing, just as long as it can't be pinned on them. Great work, guys.
The primary argument I keep hearing for increasing the debt limit isn't to pay for defense, or entitlements or administrative costs. It's to avoid defaulting on our loans. In other words, the main reason we want to borrow money is to just hand it over to the last guy we borrowed from. Doesn't anyone else think that sounds insane on its face? Bernanke recently offered this wisdom:
The analogy about balancing your check book and getting your finances in order is wrong. The right analogy for not raising the debt ceiling is going out and having a spending spree on your credit card and then refusing to pay the bill. That’s what not raising the debt limit is.
You want that to be the analogy? Are you sure? OK. Then what you're suggesting is that we continue the spending spree on our credit card, then apply for yet another credit card to make minimum payments on the original. So that's your advice?
Yes, I know. It's doomsday if we default on our loans. They want us to think that's a given without more borrowing. I don't buy that, but then I don't particularly care if its true either. To paraphrase their argument, if we don't keep borrowing we won't be able to pretend everything's OK any more. Good! We never should have started pretending in the first place. It's like fake Hayek says. "The long run is here. It's time to get sober."