Should we get rid of the debt limit?

Little Raven · Post by **Little Raven** » Wed Oct 20, 2004 1:09 pm

Yes, it's that time again. Back in 2003, you'll recall, Congress quietly raised the debt limit (the amount the US Treasury is allowed to borrow in order to finance the government) to 7.4 trillion dollars. The raise, which at almost a trillion dollars was by far the biggest ever, was supposed to get us into 2005.

As I noted in my previous thread, such expectations would seem to have been overly optimistic. We are once again out of money. Treasury Secretary John Snow is once again begging Congress for more borrowing power. But there's no way he's going to get it before the election. The last thing a Republican Congress is going to do is admit that it blew through a trillion dollars of borrowed money in just over a year.

So the Treasury department is once again pulling accounting tricks and stopping various payments so that it can avoid going into default until late November, when Republican leaders have promised to raise the debt limit once again.

So my question: Should we just scrap the debt limit once and for all? Does it really serve any purpose? It obviously doesn't force the government to reign in spending in any meaningful fashion. All it does is force the Treasury Department to engage in financial sleight-of-hand in order to accommodate the political environment on Capital Hill. This not only hurts the financial markets the Treasury is designed to protect, it makes evaluating the financial health of the nation extremely difficult for private analysts, because they have to sort through the volumes of regulative hoops the Treasury is jumping through to avoid a technical default. Who are we helping by keeping this thing around?

LordMortis · Post by **LordMortis** » Wed Oct 20, 2004 1:22 pm

Can we start going after congress for cooking their books a la Enron. Oh that's right, the promised crucifixition for all of this coporate corruption has led to nothing. I love what we are teaching the future....openly and actively. Get power at any cost, once you have it, you are literally untouchable unless you piss off others, en mass, with more power than you.

noxiousdog · Post by **noxiousdog** » Wed Oct 20, 2004 1:24 pm

What? And deprive Washington of making meaningless edicts?

noxiousdog · Post by **noxiousdog** » Wed Oct 20, 2004 1:27 pm

LordMortis wrote:Can we start going after congress for cooking their books a la Enron. Oh that's right, the promised crucifixition for all of this coporate corruption has led to nothing. I love what we are teaching the future....openly and actively. Get power at any cost, once you have it, you are literally untouchable unless you piss off others, en mass, with more power than you.

How many indictments do you want? There have been hundreds. So far, every one has taken a plea, been convicted, or is still awaiting trial.

Little Raven · Post by **Little Raven** » Wed Oct 20, 2004 1:29 pm

noxiousdog wrote:What? And deprive Washington of making meaningless edicts?

So is that a yes or a no?

LordMortis · Post by **LordMortis** » Wed Oct 20, 2004 1:40 pm

How many indictments do you want? There have been hundreds. So far, every one has taken a plea, been convicted, or is still awaiting trial

Well, lets start with Ken Lay. As I browse, it looks like they just decided to send him to trial two days ago. Well, I guess that's something....and it's about damned time. I guess my question is then what of KMart and MCI and Anderson Consulting and... Why has all of this crept out of view?

I'd like to see some of these. I'd also like to see what king of sentencing is being handed out. How do we punish people who scam millions, but do it from a leather coporate chair? Which people get the punishment? Honestly I don't know. I am part of the angry rabble with torch and pitchfork in hand. I want to see some untouchables go down. Quite frankly, I have had not faith the way we punish corporate/white collar criminials since Keating and that was only ever reinforced by the McDougals.

noxiousdog · Post by **noxiousdog** » Wed Oct 20, 2004 2:45 pm

LordMortis wrote:
How many indictments do you want? There have been hundreds. So far, every one has taken a plea, been convicted, or is still awaiting trial
Well, lets start with Ken Lay. As I browse, it looks like they just decided to send him to trial two days ago. Well, I guess that's something....and it's about damned time. I guess my question is then what of KMart and MCI and Anderson Consulting and... Why has all of this crept out of view?

Let's just say that corporate criminals seem to serve a hell of a lot more time than professional athletes. Not that either have a great track record.

Ken Lay's lawyers make a hell of alot more than a federal proscecuter. So the prosecutor better have mountains of evidence and that takes a long time to sort through.

This thread is effectively derailed. I'll double post to fix that.

noxiousdog · Post by **noxiousdog** » Wed Oct 20, 2004 2:52 pm

Little Raven wrote:
noxiousdog wrote:What? And deprive Washington of making meaningless edicts?
So is that a yes or a no?

I'm saying it's completely irrelevent. Not only is a cap completely arbitrary, but also it's meaningless. The Fed can print money at will, borrow money at will, and tax at will, and 'balance' their books at will. They consistently show a lack of thinking beyond the next election.

I thought one of the dumbest media arguments ever was the 'permanent tax cut' discussion that went on this year. I don't think that word means what they think it means. How permanent can a tax cut be when it could be repealed the next day with another vote? Have taxes ever remained stable for more than two years, let alone two administrations?

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Zarathud · Post by **Zarathud** » Wed Oct 20, 2004 10:34 pm

noxiousdog wrote:I thought one of the dumbest media arguments ever was the 'permanent tax cut' discussion that went on this year. I don't think that word means what they think it means. How permanent can a tax cut be when it could be repealed the next day with another vote? Have taxes ever remained stable for more than two years, let alone two administrations?

The latest version of the tax code was passed in 1986, thanks to a Democratic effort (through Dan Rostenkowski, the stamp fraud Congressman) and the leadership of President Reagan. And most of the core tax concepts have been around since before 1954. What changes every year are all of the loopholes/exception tweaking in the name of special interests and general political pandering. During the Bush/Clinton administrations, the Repbulican Congressional leaders have passed many new laundry lists of loopholes in the name of tax "reform."

The most recent tax bill is truly obscene -- trying to read the 50 page SUMMARY at the office is killing me. And I work in estate planning, so I actually ENJOY (most days) figuring out the tax laws. The tax bill is especially bad because it was a "must pass" bill to fix a tax structure that basically subsidized certain export strategies, which Europe proved was anti-competitive and received clearance to pass punitive tarriffs (increasing 1% each month), and completed during election season.

But repealing the debt limit is an awful idea. Congress at least needs to be forced to admit the debt problem. The national debt will never get paid until the "overdue and overdrawn" notice arrives. Probably the best reform would be to remove the voice vote procedure, and force the Congress to vote on the RECORD about all financial matters. Then we'll see where the real pork spending is coming -- and I bet Republicans are the worst offenders, too.

Yog-Sothoth · Post by **Yog-Sothoth** » Thu Oct 21, 2004 4:42 pm

Congress won't own up to the debt problem until they have to. Thats true no matter who wins. It's much more fun to keep spending money making your friends happy.

Someday soon our reckless spending - both public and private - will catch up to us, and the result will be a drop in the dollar, higher inflation, and economic contraction. If they try to inflate out of it, which may be the only choice, the result will be misery for the average US citizen.

Remember that we are financing our government deficits using short term bonds. So when interest rates go up, it will only be a short time before interest payments on the debt make a much larger dent in the federal budget than they do.

Unless they hyperinflate, of course. In the Weimar republic a pint of beer cost a billion marks. At that rate we can pay off the current debt quite quickly. Of course, the finances of the average person will be in ruins by that time - as they were in Weimar Germany.