To Shut Down or Not to Shut Down? Why Is This a Question?
Once again, we’ve just witnessed our political leaders arguing about raising the debt ceiling with the threat of a government shutdown. Solving this issue seems kind of like reaching the Promised Land — only we’ve been wandering in the desert for substantially longer than 40 years!
The government can’t pay its bills without borrowing money that we, the taxpayers, then owe. But we must pay our bills. So the Federal Reserve Bank creates money out of thin air by adding digits to its accounts and lending it to us at interest. It sounds too ridiculous to make up, but it’s true. The constant increase in the national debt causes an ongoing rise in the money supply. Other things may cause price increases, but this, by definition, is inflation.
Inflation, by its very nature, is immoral. It’s a form of theft. Suppose you were a union electrician, a power company linesman, or any hard-working American who retired four years ago. You did skilled but back-breaking work for 40 years. You bought a modest house, raised a family, and because you were frugal, saved $100,000. But today, you’d only have the purchasing power of $75,000 in your bank account. If you had to draw on it, you’d have less. Where’d your money go?
Here’s Where
Not only did our political leaders steal it from you because of how they ran the government, but they enslaved you for 25% of the work you did to acquire that money. You actually were not compensated for all those broken fingernails and backaches. Isn’t slavery illegal in America? How does “Thou shall not steal” actually work in a Christian nation?
A week ago, our political leaders made a deal that pushes the problem out for a few months. When that time runs out, they’ll come out of their corners again, swinging at each other over this (in my humble opinion) very foolish and destructive issue.
Hey Big Spender
If the Republicans don’t act when they have control over both the executive and legislative branches of government, they’ll lose credibility. When George W. Bush had both houses of Congress, he and the Speaker, Dennis Hastert, were big spenders, which hurt the Republican brand. On the other hand, with his Contract with America, Newt Gingrich balanced the budget. He brought credibility to the Republicans. Because they run for office on platforms of fiscal responsibility, big-spending Republicans add hypocrisy to the sin of inflationary theft. Voters will hold them to a higher standard for this reason.
President-elect Donald Trump wanted to either raise or completely abolish the debt ceiling in any deal made now because he knew we would run out of money again within months of him coming into office. It’d be better if President Joe Biden owned this mess politically. So, he and Elon Musk, who he’s promised to appoint as cohead of his new Department of Government Efficiency (DOGE) pressured members of Congress to shoot down the bill both sides had worked out together.
The Democrats have wanted to abolish the debt ceiling outright or extend any discussion over it for long periods when they’ve held power. They believe government spending drives the economy and that by running huge deficits, they will be reelected because it equals a good economy. (They should study the Great Depression. But that is a topic for another day.) Now that the Republicans stand to take the reins, the Democrats oppose the idea.
Does Anybody Here Know How to Play this Game?
Hypocrisy? You betcha! But what do you expect? At least a bloc of Republicans in the House stood on principle and shot down Trump’s plan to increase or abolish the debt ceiling now. They voted with the Democrats to make a short-term funding deal without the debt ceiling extension or outright abolition because they believe it’s time to face and solve the problem. Texas Congressman Chip Roy is one to watch.
According to The Associated Press, the bill Congress passed to avoid the shutdown is 118 pages long. The bill Trump and Musk shot down by intervening was 1,500 pages long. Fewer pages is better, as a rule, if we hope to balance the federal budget eventually.
DOGE is supposed to issue a report in two years. However, it will be a dead issue if the Dems take one or both houses of Congress after the midterm election. If Trump and the Republicans are serious, why not get the report done in one year so they can use it before they potentially lose power?
We’re Living on Funny Money
Our dollars are debt instruments. So when the federal government runs a $1.8 trillion deficit, roughly the number in the last fiscal year, they increase the money supply by at least that much — on top of the balance of all the other new loan balances against paid-down loans.
If we achieve and maintain a balanced federal budget, we’ll experience slight deflation over time, making the poor richer and growing the middle class. The rich then would get that way by producing goods and services that people want. They’d trade with them freely because they’d offer perceived value to society.
Today, people get rich largely off the government printing press. All the printed money goes into their assets. The CEOs of publicly traded companies pat themselves on the back with huge bonuses when their stock prices increase. But it’s government funny money.
When There’s No Vision, the People Will Perish. ~ Proverbs 29:18
The more efficient we become, the more we produce in any given period of time.
Economics is production and exchange. Because we specialize in what we do, we do it faster and better than others. But the same is true of those we trade with. We share our efficiencies in trade. Part of my efficiency is my profit, and part is your incentive to trade with me. New technologies and better production methods increase our standards of living over time. If our currency is stable, it’ll gain value against our goods and services. Our money will gain purchasing power over time if we balance the budget.
We need politicians with a more godly vision — one of a healthy America with a balanced budget.
James Malloy is the author of Economic Clarity or Political Confusion: The Classical Cure for Keynesian Debt & Deficits. He has a B.S. in Business Economics and has been a licensed California mortgage and real estate broker for more than 20 years.