The debt ceiling has become a highly political issue this year because most of Congress was elected to reduce government expenditures and significantly reduce annual deficits.
The political threats surrounding the debt ceiling are mean-spirited theatrics, particularly by the president who lied and said he might have to withhold checks to Social Security recipients and other pensioners. That is not a possible scenario, it was a mean-spirited lie.
The only thing the president would have to do, if Congress fails to raise the debt limit is (1) announce that there will be one hundred percent coverage of all interest payments on bonds and all bonds will be redeemed in full. Global markets will be calmed. (2) announce that all federal employees, excluding military and critical occupations, earning over $80,000 a year will receive temporary government coupons for 10% of their salary until the issue of the debt ceiling is settled.
There are several reasons we have such a stunning annual deficit, equal to 10% of the current national debt. First is that the financial crisis of 2008 was allowed to impact lending in the commercial world which made reasonable economic growth impossible. I have recommended many alternatives including the creation of an FLIC.
Secondly the Pelosi-Reid Keynesian stimulus package drained millions of jobs out of the economy. Seriously retarding growth.
And now there is conclusive data to show that high debt to GDP ratio that we have is harmful to growth.
Inadequate economic and tax revenue growth has been half the reason for our large deficits. Part of that inadequacy we now know is due to the ratio of high annual deficits to GDP in the past two years.
The rest of the reasons for inadequate economic growth remain to be discovered. I suspect a hostile Democratic government plays some role.
