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Guest Post: Conservatism And The Debt Ceiling

Tyler Durden's picture




 

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.

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Fri, 10/18/2013 - 13:35 | 4069442 LetThemEatRand
LetThemEatRand's picture

"Unfortunately it appears as if some otherwise sharp minds have fallen prey to the liberal device of alarmism."

Give me a break Miller.  These "otherwise sharp" minds of which you speak are simply speaking on behalf of oligarchs everywhere who want the free money and who orchestrated the whole mess going back to 1913.  It's always the same with you guys that you express surprise when the guys to whom you want to hand the keys are picking our pockets while they talk about how picking their pockets is wrong.

Fri, 10/18/2013 - 13:45 | 4069493 cougar_w
cougar_w's picture

I'm really sorry to rain on anyone's parade, but survival-thru-debt is going to be our future until the end of the western world. As one of the Tylers pointed out, Congress admits that we need to raise the debt ceiling to pay our bills. Signs of the Apocalypse clearly.

The debt cannot be paid. The borrowing cannot be stopped. There is no end in sight, there is no end around the corner, there is no end possible at all.

Doesn't matter what anyone thinks on the subject. The debt is now in control of events, not the other way around, and it will dominate our lives until the end of "money". So imagine how you will live without money, because that is where you are headed.

Fri, 10/18/2013 - 13:57 | 4069553 Grande Tetons
Grande Tetons's picture

The best one can do is to prepare as much as possible while enjoying the current moment. Tall order for sure. 

Fri, 10/18/2013 - 14:37 | 4069716 Bryan
Bryan's picture

"The best one can do is to prepare as much as possible while enjoying the current moment."

 

I like that.  What else can you do?  Staring at and cursing your computer screen full of charts and your CSPAN show just leads to anger and bitterness.  Admit that we are pawns in the grand Chess Game lead by the oligarchs, and be happy being a pawn.  Either that or run for office as a true believer and get smashed.

Fri, 10/18/2013 - 14:52 | 4069777 Joe Davola
Joe Davola's picture

With the advent of BitCoin and the discussions of electronic only currencies, I wonder if the plan is to party like a sailor on shore leave then switch to a much more abitrary (if that's even possible) 'monetary' system.

Fri, 10/18/2013 - 15:30 | 4069904 Anusocracy
Anusocracy's picture

Despise your fellow man for a lack of ability or desire to leave the animal world.

Sat, 10/19/2013 - 00:04 | 4071232 TheReplacement
TheReplacement's picture

Perhaps I misunderstand.  I believe the animal world is naturally ordered and our attempts to leave the ordered world have lead us to a fantasy induced cliff and we don't seem to have any mass ability to grasp reality.

Fri, 10/18/2013 - 17:22 | 4070272 Nick Jihad
Nick Jihad's picture

Not at all. Aaron Clarey has pointed out, that life in a declining empire can be pleasant and enjoyable. Read "Enjoy the Decline".

Fri, 10/18/2013 - 14:21 | 4069665 greatbeard
greatbeard's picture

>> So imagine how you will live without money

Sounds like a divorced guy with four kids in Florida.  I might need to look one up so he can give me some pointers.

Sat, 10/19/2013 - 13:10 | 4071839 rubiconsolutions
rubiconsolutions's picture

"....and it will dominate our lives until the end of "money"."

@cougar - There's a difference between currency and money. Currency is not a store of value for the long term while money is in fact a store of value. Gold and silver are money, Federal Reserve notes are not. Money will continue to exist and will thrive while currency, namely US dollars will go to zero just like every other fiat currency in history. Debt is only in control of events to the extent that it will eventually extenguish currency. Those of us with real money will be just fine.

Sat, 10/19/2013 - 01:04 | 4071264 sadmamapatriot
sadmamapatriot's picture

Brit Hume is still a douche but this is about right. http://www.youtube.com/watch?v=Eg_SsaP-9V4

And Denninger oints the finger exactly where it should be. http://market-ticker.org/akcs-www?post=225196

Fri, 10/18/2013 - 13:35 | 4069445 heinrich6666
heinrich6666's picture

Alarmism is a liberal device?

/didn't read

Fri, 10/18/2013 - 13:35 | 4069446 DoChenRollingBearing
DoChenRollingBearing's picture

It´s the spending!

It´s the spending!

 

Time for America to wake up, will they?

Fri, 10/18/2013 - 13:56 | 4069551 The Navigator
The Navigator's picture

Time for America to wake up, will they?

Not until it's too late. It all works until it doesn't.

The hairs on my neck are up; it feels like its just around the corner.

Unfortunately it's felt like that since 2007 and this sentinel is weary.

Fri, 10/18/2013 - 14:14 | 4069641 NOTaREALmerican
NOTaREALmerican's picture

Re:  Unfortunately it's felt like that since 2007

 

Unfortunately,  you've got to ask yourself if that's paranoia or reality.

My father was waiting for "inflation" to destroy Merican since Johnson.   He's dead now.   Did I inherit his paranoia, or is "it" real?   

The extroverted sociopaths can keep the scams going for a long time.  The US dumbasses are still quite wealthy (compared to the rest of the world), and there's LOTS of loot still available to take.   As long as the "batteries" produce heat why flush them down the toilet.  

Fri, 10/18/2013 - 15:51 | 4069990 Anusocracy
Anusocracy's picture

Your father was correct.

Inflation through the central bank has undermined or destroyed virtually everything good about America and the once self-reliant middle class has been reduced to serfs and supplicants. Hence, it exists in name only.

The US is in its Weekend at Bernie's condition - a corpse that can't realize it's dead.

Fri, 10/18/2013 - 15:36 | 4069922 Anusocracy
Anusocracy's picture

It's the government!

It's the government!

About a zero chance that H. sapiens will wake up.

Fri, 10/18/2013 - 13:37 | 4069458 quasimodo
quasimodo's picture

"Debt on debt is no way to run a country, a household, or an individual bank account"

 

Seem to be working for us for now. And to think, "way" back in '06 I thought we were screwed, yet here we are.

I keep waiting for the wheels to fall off, for vindication. It seems we have run flats keeping us going.

Fri, 10/18/2013 - 13:53 | 4069539 NewAmericaNow
NewAmericaNow's picture

The problem is the Fractional Reserve Monetary System and The Federal Reserve. We shall pay a great price for not following that portion of the Constitution.

https://www.youtube.com/watch?v=iFDe5kUUyT0

Fri, 10/18/2013 - 14:24 | 4069674 NOTaREALmerican
NOTaREALmerican's picture

Re: We shall pay a great price for not following that portion of the Constitution.

 

Yeah, but IF you were a sociopath elected by dumbasses what part of the Constution would you ignore?

That's Correct...  the parts that didn't allow you to loot the dumbasses.   See how life works?

Too bad the "Conservatives" didn't try to shrink Big-MIC for the last 60+ years.   But, see how life works?   Why do what's "right" when so many other activities get you more famales with large teeth.

Fri, 10/18/2013 - 13:39 | 4069468 kevinearick
kevinearick's picture

You Are Here Tin Soldier

The global economy is in a dead short.

 

“I have plenty; have some.”

becomes

“I got mine; you get yours.”

becomes

“Get them before they get you.”

You are here.

 

Congress can only affect the middle class. Capital embezzlers are protected by the artificial nation/state border system that normally ensures their escape, “the most liquid plumbing, blah, blah, blah.” Congress has no idea what labor looks like because it has never worked a day in its life.

Now, to avoid a real war, Congress is feeding the middle class to the wolves, layer by layer, every three months, under the umbrella of sequester and the debt ceiling dog and pony show, hiding the reality that the entitlements cannot be paid in plain sight, until the last moment. War begins when capital is pitted directly against capital, a tempest in a tea pot as far as labor is concerned.

Consume it all, pretend to be busy and buy guns. That is all Congress has to offer the middle class. Get in line, follow the program, watch the magician and ignore the buzzing in your ear.

Repeat after me:

“Yes we can” print to infinity and beyond. “They pretend to pay us and we pretend to work.”

Oh, that’s right; there is also the issue of the robots in charge of full employment and stable prices that have never worked. Next plan please, same as the old plan - do nothing, change your mind, get anxious and blow up – Rock of Ages.

Dress up, click your heels and get on ‘ze’ train. Nothing new about IBM, the Bellwether.

Funny, how the proton and neutron react automatically, seeking the perception of security. The only difference between any kind of bomb – clutch, propulsion or explosion – is perception of time. Keep chasing property and money to maintain the status quo.

Borrowing to pay interest on the debt is like getting another credit card to pay interest on your other credit cards. That works, until it doesn’t. Go ahead, Nest.

Fri, 10/18/2013 - 13:41 | 4069474 cpnscarlet
cpnscarlet's picture

Tell us something we don't know.

BTW I prefer to be known as a paleoconservative.

Fri, 10/18/2013 - 13:41 | 4069480 Newsboy
Newsboy's picture

The change of monetary regime will be harsh and global.

Who wouldn't rather "kick the can"?

Fri, 10/18/2013 - 13:50 | 4069520 cougar_w
cougar_w's picture

People around don't seem to understand that this is a game that will likely end in massive wealth destruction across all stores of value.

Fri, 10/18/2013 - 14:09 | 4069602 Winston Churchill
Winston Churchill's picture

There are no safe places to hide,only less unsafe ones.

So what is your prescription for the least loss of wealth Cougar ?

I am always open to suggestions.

Fri, 10/18/2013 - 14:30 | 4069688 cougar_w
cougar_w's picture

I don't think one can hold abstract stores of wealth. Cash or probably PM either. Keep some, no harm in that, but hold no great hopes.

Non-abstract stores of value probably have the best long-term "value"; arable land, education (not degrees, actual understanding), tools and trades, community, good physical and mental health, resilient spirituality. All these can be created or made stronger by the liberal application of abstract value (money) in advance. Once the money (in whatever form) is gone or devalued into worthlessness, the real value it once contained will have already been transferred away.

Those are my thoughts. Not very useful for the immediate gratification crowd out there. But nobody said this was going to be easy or straight-forward.

Fri, 10/18/2013 - 15:06 | 4069801 Winston Churchill
Winston Churchill's picture

Thanks for sharing.

While I have valuable  practical ,and theoretical  skills, age, and some near fatal

encounters with our modern practising medicine men,will make me a liability in the Brave

New(old) World we are about to go back to.My experiences living in the 3rd world

means I will prolly survive,when most won't the horror thats coming our way..

Very few here realize how badly this  is going to end.I think you have a handle

on it though.I think its much closer than they realize.They are blase after to many cries of wolf.

The hairs on the back of the neck saved me in several impromptu revolution ituations,

they are raised now.

Hiding in plain sight seems to be the only answer I can come up with.

Fri, 10/18/2013 - 15:37 | 4069929 MachoMan
MachoMan's picture

This is the answer...  localization and diversification...  put your money in things with utility, that you will use, and be done with it...  if they're useful, then they'll always have SOME value.

Fri, 10/18/2013 - 13:52 | 4069536 the grateful un...
the grateful unemployed's picture

kick the can kickers out of office

Fri, 10/18/2013 - 14:00 | 4069571 cougar_w
cougar_w's picture

There is a very long line of wanna-be can kickers eager to replace them.

Fri, 10/18/2013 - 13:42 | 4069483 Trampy
Trampy's picture

I tell people I'm a libertarian anarchist. 

The redundancy is necessary because of all the faux "libertarians" who voted for Mitt instead of Gary Johnson. 

Fri, 10/18/2013 - 13:46 | 4069494 cpnscarlet
cpnscarlet's picture

I voted for Gary, my former governor

Fri, 10/18/2013 - 13:53 | 4069538 El Vaquero
El Vaquero's picture

Red or green?

Fri, 10/18/2013 - 14:13 | 4069632 Steve in Greensboro
Steve in Greensboro's picture

My Johnson got more votes than Gary Johnson.

Fri, 10/18/2013 - 13:54 | 4069545 cougar_w
cougar_w's picture

999 out of 1000 Americans will have never heard of a "libertarian" and nearly as many will tell you that an "anarchist" is a communist who throws rocks at police.

Fri, 10/18/2013 - 14:59 | 4069799 Marco
Marco's picture

Why call yourself an anarchist? The anarchists don't buy it, the man on the street doesn't buy it (as contorted their concept of anarchism is, you still don't fit it). I just don't understand why Rothbardians keep trying to hijack the term.

Fri, 10/18/2013 - 15:45 | 4069947 MachoMan
MachoMan's picture

The redundancy spreads idiocy (as the terms aren't redundant)...  use accurate terms and force others to...  this is how language dies.

Fri, 10/18/2013 - 13:47 | 4069502 A Lunatic
A Lunatic's picture

This will all end in the most Hellacious worldwide civil war ever known to mankind. Maybe 5 years, maybe 500, but that's where it's going........

Fri, 10/18/2013 - 14:14 | 4069638 denverdolomte
denverdolomte's picture

Completely agree. I have had a hard time wrapping my head around a number of aspects surrounding our worlds events. Then entire world run on debt, power elite in pseudo control of resources......in now shape or form can this end well. Also agree on the when? question of the paradox, we all know it can't work and can't keep spending, but the fact that it's a faux market reality will it collapse on its own or some outside factor that will cause it. Good post AL.

Fri, 10/18/2013 - 14:20 | 4069664 NOTaREALmerican
NOTaREALmerican's picture

Re: Maybe 5 years, maybe 500

Unfortunately, maybe 5 hours.

How many countries on the planet have nukes with semi-psychotics ready to push the button because their "loving" imaginary friend happens to get pissed at the neighbor.  

Fri, 10/18/2013 - 13:47 | 4069504 gjp
gjp's picture

Outside of Ron Paul, there isn't a real conservative in the entire landscape of Western politics.

Fri, 10/18/2013 - 13:51 | 4069524 the grateful un...
the grateful unemployed's picture

The Reagan administration thought Goldwater was an extremist. That was the first time they opened pandoras deficit box, and its been bipartisan money printing ever since.

Fri, 10/18/2013 - 16:01 | 4070015 Balanced Integer
Balanced Integer's picture

People in Reagan's administration thought that Goldwater was an extremist. (Bush, Sr., for one.)

Reagan admired Goldwater and spoke for his campaign in 1964. http://youtu.be/qXBswFfh6AY

Fri, 10/18/2013 - 13:48 | 4069507 the grateful un...
the grateful unemployed's picture

obama's status quo is economic blackmail. the tea party is calling their bluff, which is no spending cuts of any kind, or you'll have to shut down the entire government. the only thing they're willing to discuss is cuts in the growth of spending. if the feds balance sheet were liquidated housing prices would fall, and the economy would recover on its own, and spending cuts would occur naturally as a result of being able to buy a $1000 military toilet seat for maybe $50. obama has the mindset of big numbers mean better economic growth, (asset inflation) while the system WANTS to contract on its own, in order to function properly. obama is an idiot stuck in medievel economic methods.

Fri, 10/18/2013 - 15:03 | 4069815 Marco
Marco's picture

The US has 4 decades worth of accumulated debt ... the economy doesn't want to contract, it wants to implode.

Fri, 10/18/2013 - 13:52 | 4069535 dracos_ghost
dracos_ghost's picture

Congress is irrelevant after TARP. With the abrogation of separations of powers and concentration of power in the Executive Branch, Congress has NO authority other than rabble rousing like Cruz tried to do. BFD. No one cares. Even the Tea party are a bunch of hippocrites. "Cut Spending NOW...except for my shit of course". "Halt Obamacare, except for my staff and my family". "Cut entitlements but let's bring in waves of illegals and completely collapse the system". And so on and so on.

DC is theater. Harvards' Hasting Pudding vs Yale's Whiffenpoofs. And the sheeple love the drama. Right as the bolt gun is pressed against the back of their skull. There is no solution at this point, it's just the timing of the collapse. IMO, August 2016, when all of Obamateur's cronies head for the exits. Until then, when rape is inevitable and all that jazz. SPX 2k and Dow 20k. 2 and 20 so to speak.

P.S.

For those who really want to get pissed and have Netflix, watch "HANK: 5 Years after the brink". Friggin textbook study into sociopathic narcissism and he has the balls to say he saved the world -- except for the last 3 minutes of the interview where he said it's much worse now because of all the programs he set up. But he was gone by then.

Fri, 10/18/2013 - 13:59 | 4069569 the grateful un...
the grateful unemployed's picture

the process in America to Bolger the criminals, wait until they are ready for the retirement home and give them symbolic justice. what does it matter when all you can do is stare at four walls. after these guys (Bush Paulson Cheney Obama) are ready for pasture will they hand out convictions. i still wonder why Bush 1 wasn't nailed but he was a war hero and he has a lot of money. there could be an October surprise there, hair of the dog, Iran Contra to bite him before he slips away.

Fri, 10/18/2013 - 13:53 | 4069540 monad
monad's picture

This isn't about borrowing. This is about destroying free will to impose despotic global collectivism. 

It only stands to reason that where there's sacrifice, there's someone collecting sacrificial offerings. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.

Self-sacrifice? But it is precisely the self that cannot and must not be sacrificed. Ayn Rand and coincidentally, Jesus Christ

Fri, 10/18/2013 - 13:58 | 4069561 cougar_w
cougar_w's picture

No actually it really is all about borrowing. I know, that's scary to think about. About shit getting real. Being able to survive only by pulling forward future energy reserves means the human world is doomed outright by the unflinching entropic forces of the universe, rather than say destined for some dramatic power struggle between titanic forces for good and evil.

Why yes I did watch Star Wars. But I was not impressed.

Fri, 10/18/2013 - 17:55 | 4070393 Nick Jihad
Nick Jihad's picture

I'm less worried about energy, having recently read about next-generation nuclear energy. New designs are far more safe, and it turns out to be possible to dramatically reduce nuclear waste, compared to current reactors. It also seems that, the more that environmentalists observe the effects of tar-sands extraction, and the like, the less inclined they are to veto nuclear power.

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