Guest Post: Conservatism And The Debt Ceiling
Submitted by James E. Miller of The Ludwig von Mises Institute of Canada,
I am not very good at self-identifying. When asked of my political affiliation, I waffle between libertarian, Rothbardian, or just straight out anarchist. Perhaps the best answer is “none.” Explaining the immoral nature of the state is too big of a feat for casual conversation. Regardless of my anti-state views, there is a soft spot for conservatism somewhere in my inner political makeup. And when I reference conservatism, I mean real conservatism; not its bastard third cousin known as neoconservatism that was birthed by Trotsky.
Hayek’s critique notwithstanding, libertarianism and conservatism overlap slightly when it comes to public policy. Both recognize the tendency of the state to become excessive with authority. The fundamentality of law is paramount in both viewpoints. The virtue of temperance is held in high regard for followers of both Rand and Burke. At times, there is conflict on the boundary of rights whether the greater good is worth violating the individual liberty of some. But fiscal issues are where the conservative and libertarian find the most common ground.
As the United States government remains partially shut down, Washington is hurtling toward its statutory debt limit of $16.7 trillion. Come sometime this week, Congress will either have to pass an extension of the cap or no more money can be borrowed. Some writers of the conservative bent have expressed worry there will be a default on the national debt if a couple of ideological Congressmen keep getting their way. Rod Dreher claims a small band of Tea Party Republicans are using the “prospect of a sovereign default as political leverage.” Commentary editor John Podhoretz calls the strategy (if there were really a tactic of shorting bondholders) “suicide of the right.” Ross Douthat, the estimable token conservative of the New York Times, labels the whole gambit “blackmail” and “much dumber and more dangerous” than the debt limit acquiescence during Reagan’s second presidential term.
These critics, for all their esteemed insights, are mistaken in their belief of the infallibility of Uncle Sam’s credit. That the thieves in Washington collect enough in tax ransom to make interest payments is not considered. Neither is the inconvenient truth that buyers of government securities are not engaging in a riskless activity – they too made an investment and thereby accept the possible consequences involved. The state’s inherent ability to fleece money for operation is limited by decree and the impending furor of a plucked populace. Placing undeniable confidence in the full faith and credit of a government is nothing but ignorant reverence to force.
That aside, Washington will still not default on owners of its bonds. Talk of such an event is downright scaremongering. President Obama and the media are leading the chorus of fearfulness in this regard, and some otherwise sharp fellows are falling under the siren song. It’s unfortunate yet understandable. The failure to pay creditors in full would be a painful blow to America’s prestige. It would also hold ramifications for the global economy if investors began a fire sale of U.S. Treasuries. Nevertheless, that hypothetical is far from realistic in the immediate future.
That doesn’t make defaulting an impossibility however. For the superior economic productivity within its borders, the U.S. government is gifted with a sizeable tax base. Still, the politicians in charge can’t help but borrow close to .40 cents of every dollar spent – and that’s just on-the-books accounting. In reality, Washington is in possession of $222 trillion in unfunded liabilities largely due to entitlement programs. Such a number is so astronomical that default is already in the cards. The question is when it will occur. Like most things in life, the medicine can be swallowed now or later down the road.
The conservative case against another raise in the debt ceiling is not grounded in politics. It is made by the prudential character of anyone who firmly understands that well-being cannot flourish by using a disease as a cure. As Russell Kirk wrote,
A conservative is not, by definition, a selfish or a stupid person; instead, he is a person who believes there is something in our life worth saving.
Debt on debt is no way to run a country, a household, or an individual bank account. By borrowing in seeming perpetuity, you preserve the good times. But it only lasts as long as your credit rating remains intact. There is always the appearance of stability in a drunk who maintains his level of intoxication. As long as the bottles of bottom-shelf whiskey keep coming, the inebriated will not have to go through the painful correction of sobering up. Not many would disagree that the comedown after a party is a necessary part of existence. But when it comes to debt, the circumstances apparently change.
The virus of progressivism, at its essence, is the belief that paradise can be created on Earth. In practice, it’s presented in a variety of efforts that attempt to hurdle the natural barriers of life that keep us from being gods. The minimum wage, hate crime prohibition, public housing, income redistribution, and tax funding for welfare are all byproducts of an ideology that thinks it can it simply wipe away the laws that govern the world. What is not realized, or is willfully ignored, is the unseen, pernicious results of all government policy. Public debt brings the pretense of prosperity while avoiding the true cost. There are several economists who assert that government liabilities don’t really matter because, in the end, we owe it to ourselves. As Rothbard wrote back in the heyday of supply-side economics,
…at least, conservatives were astute enough to realize that it made an enormous amount of difference whether — slicing through the obfuscatory collective nouns — one is a member of the “we” (the burdened taxpayer) or of the “ourselves” (those living off the proceeds of taxation).
Since taxation is always and everywhere theft, the only justified approach to government debt is total repudiation. The money that passes through the state’s hand to the creditor is tainted with the mark of crime. The correction would be tough, but the world would not end in flames. Another, less radical path is simply for the U.S. Treasury to cancel its debt held at the Federal Reserve. Since the Fed cannot go bankrupt due to the recent adoption of a questionable accounting scheme, both entities would pretty much keep to their respective gimmicks to outrun an inherent insolvency.
The whole fulcrum of the bloated American state is beyond ready for a radical deconstruction. The same goes for most nation-states in the West. The continual borrowing, serviced indiscreetly by an accommodating central bank, has made an entirety of the populace fat and happy off of debt. Large pools of capital continue to be depleted with little refreshment. In 2008, there was a massive correction in this wholly destructive process, but it was averted through government intervention. The same easy credit policy that fueled the asset bubble-and-burst is being replicated at an unprecedented rated.
This is no realistic method for operating any institution. Something has to give eventually. The conservative will often pride himself on taking a realistic view on affairs. Refusing to see the train wreck that is Washington finances means putting one’s head in the sand and hoping for sunshine and lollipops. It’s the polar opposite of a sustainable yet measured outlook toward good living.
Any conservative who places high value on civil society over the intrusion of government should balk at the prospect of a higher debt load. It makes certain that the ruling political class will not cease in their effort to infiltrate private life. Unfortunately it appears as if some otherwise sharp minds have fallen prey to the liberal device of alarmism. Keeping the status quo is a nice goal if the present state of affairs is bucolic enough. But with an increasingly militarized domestic police presence combined with a massive surveillance apparatus that has made privacy into an anachronism, the times are far from serene. Taking a hardline on the national debt would go far in reducing both of these highly viable threats to peace.