Raise The Debt Ceiling

May 22nd, 2011   Submitted by Seth King

It is amazing to me how frequently I reevaluate my old minarchist views as a new anarchist. Positions that seemed so incredibly important as a limited government libertarian now seem trivial, irrelevant, and sometimes even wrong-headed coming from the standpoint of an anarcho-capitalist. One such topic that is hotly debated is the raising of the federal debt ceiling. Case in point, Judge Andrew Napolitano admonishes Congressmen five nights each week on his show Freedom Watch not to increase the amount the United States government can borrow. There are even many anarchists, particularly at LRC, that preach a balanced federal budget. I’d like to offer a dissenting opinion.

Credit Limits

Putting aside any Constitutional or fiscally sound reasoning, the entire notion of the federal government limiting the amount it can borrow is patently absurd. This is because debtors are not the entities that limit credit lines. Creditors are. Every debtor wants an infinite credit line. They may choose only to borrow a fraction of the amount credited to it, but that is not what is being debated. The current question is how much the federal government is allowed to borrow. Given its proclivity for ever increased spending, the answer is determined solely by how much creditors are willing to lend. Furthermore, students of Austrian School economics understand that any breach in the government’s credit line will immediately be covered by the debasement of its currency. This, likely, has been happening for some time.

Liabilities

The claim many minarchists make is that the federal budget could be balanced without defaulting on its creditors. But this position is either disingenuous or naive. The truth is that the government’s creditors are not only individuals and institutions that hold Treasury Bills, but also all of the recipients and soon-to-be recipients of Social Security, Medicare, and Medicaid. Regardless of whether or not an individual paid into these programs is beside the point. The federal government made a promise to pay. And not fulfilling its promise is a de facto default.

It is also inconsequential if any of the government’s creditors deserve redemption of their claims. This is because the United States government made promises it could not make good on under any circumstances. Even under the best minarchist scenarios, such as ending all foreign and domestic militarism, entitlement spending greatly exceeds possible revenues. Default is inevitable.

The Two Choices

Understanding the severity of the issue, we are faced with a dilemma. If the United States were to balance its budget millions would be denied the care they have come to expect. Under normal circumstances we could feel confident that the free-market and free individuals could come to the rescue and fill the void. However, the amount of resources and services the baby boomer generation expects to receive is far too great, even for the free-market to handle. This sort of default, then, will only reinforce the notion that reduced government spending equals abandonment for the elderly, indigent, and poverty stricken, and that the free-market is inept at social welfare.

On the other hand, if the United States does not balance its budget, those individuals dependent on government will still be denied the care they have come to expect. The currency will be destroyed and many millions more will be forced economically to cast off the yoke statism and debt slavery in order to survive. In other words, the state will lose all of its legitimacy as caregiver and the philosophy of liberty will grow in popularity.

Conclusion

The United States government has promised the moon to millions of people. Neither the state nor the free-market can deliver what is expected. These people lived their lives accordingly and squandered vast resources believing that the state would supplement, if not outright provide, their retirement and health care. The elder generation, as well as their children, will be sorely disappointed when care is denied. The state can scapegoat the free-market if it curbs spending. If it chooses to destroy the currency, however, then the philosophy of liberty stands a chance.

This is not to say that anarcho-capitalists should advocate any government policies. This is the state’s problem and we should intend on letting it stay as such. Taking any ownership of it is foolhardy. Our efforts should not be geared towards influencing the body politic, but instead to labor for the voluntary society that we envision.

15 Responses to “Raise The Debt Ceiling”

  1. KristNo Gravatar says:

    Amen!

  2. PhilNo Gravatar says:

    I do have to disagree with two points of this article, although I did enjoy reading it.

    I think it makes sense for the US to set a debt ceiling. Selling sovereign debt is just a promise to increase taxes on the citizens at a later date in order to pay it back. If all tax increases must be approved by Congress, then it would be appropriate to make Congress vote on increasing the debt limit which is essentially a futures contract on tax rates.

    Also, I disagree that not fulfilling obligations on SS and Medicare is a de facto default. Saying so assumes that the government actually promised to pay those entitlements. While the political rhetoric would suggest that there is a promise, the legal statements do not.

    The court cases that refer specifically to Social Security are Helverding v. Davis and Flemming v. Nestor.

    In Helvering v. Davis, the SCOTUS ruled that if SS was to be Constitutional, the excess tax revenues had to be spent as part of the general fund.

    In Flemming v. Nestor, the SCOTUS ruled that the government is not contractually obligated to repay SS taxes to the individuals.

    From what I understand Medicare was set up much like SS. While the above cases are specific to SS, I believe that the same concepts transfer over to Medicare because of the similarities in the programs.

    So, in short, the government took your FICA taxes and spent them. They even made an accounting entry in the federal debt (the so-called trust fund) to prove that they did. Then they told us that they are not contractually obligated to return the taxes that they no longer have. I believe that anyone who expects to receive their FICA taxes back is mistaken.

    If the US chooses to default on its obligations legitimately by simply failing to pay them, specific debt holders (notably those who purchased the Treasury Bonds and those who receive the entitlement benefits) will be the ones to suffer the consequences.

    If the US chooses to default on its obligations illegitimately through inflation where they give you the appropriate number of dollars, but not the right amount of money, everyone in the country will be hurt, even those who specifically avoided Treasury Bonds and planned to avoid relying on the entitlement obligations.

    I do agree that politicians will try to blame the consequences of reduced spending on the free market instead of themselves and that the economic idiots out there will believe it.

    But I think that making the people who put their faith in the US government bear the default related consequences of their poor choice is much more just than making those who who made the right choice to be independent of the US government’s investment and nannying bear the inflationary consequences so that the afore mentioned group can be bailed out.

    • Seth KingNo Gravatar says:

      I think there are a couple of points you’re missing.

      #1 The US Government is not obliged to pay anybody, ever. Not even bond holders. Who will oblige them to pay? The government writes its own rules, so bringing any legal points into the debate is meaningless.

      #2 You talk as if the government makes moral decisions. It doesn’t. It is a criminal organization and will always do what it believes will further its own goals.

      The point of this article wasn’t really to advocate petitioning the government to raise the debt ceiling. To be honest, I don’t give a damn what the government does. I am divorcing myself from the government’s problems. My goal was merely to show another side of the debate from the anarchist’s point of view. The way I see it is that we’re damned if they do, and damned if they don’t. And anarchists should not really be getting involved in that bloodbath by going around and taking positions on the matter or even voting.

  3. Excellent article! Very well stated.

  4. I. M. PericlesNo Gravatar says:

    The Federal Terrorists can create as much “money” as they want. It is true that the Rothschild/Rockefeller Federal Reserve Monopoly Counterfeit Organization actually LIMITS what the Terrorists actually try to spend (Obviously) but if the Fed doesn’t print them money, then the Political Terrorists will nationalize the Fed and the USA will immediately become Zimbabwe. The key to proper Slavermastery is to create an environment were the slaves do not realize that they are slaves (This is really the main difference between Fascism/Democracy and Communism)…This means slowly debasing the currency. I don’t think Americans are quite as stupid as the people in Zimbabwe…Yet.

    Got Gold?

  5. Audrey BarberNo Gravatar says:

    I agree that this government is a criminal enterprise, but what I don’t agree with is that we, as a group can do much about it. Personally a person can do it as long as they can get away with it, ie: not pay taxes, not register your car, not get a business license when you want to start a business, not pay attention to the propaganda and the mass media, not accept food stamps, even if your children are hungry. As for that last comment, I think that people should get as much money out of the government as they can so the powerful are effected. What do you think about local currency or bartering in these bad times? Don’t rely on the municipal water companies to supply us with water, but secure our own water supply, as a group, or even individually. Your thoughts?

  6. Audrey BarberNo Gravatar says:

    I thought more about it, I think that you should keep a low profile, instead of making yourselves so public, because that is dangerous. Guerrilla warfare tactics have worked very good against an overwhelmingly huge oppressor like the government. Broadcasting your view makes you an easy target.

  7. I. M. PericlesNo Gravatar says:

    Audrey…You must learn to live your life like a stateless pirate. This is how you counter Democracy-Mob Political Terrorism…Always take from them and never give them anything (Don’t be a Chump)…and above all..Stay Mobile! Prepare youself to escape or end the lives of parasites whether they be muggers, rapists, terrorists/politicians, voters, mosquitos, tics, viruses….

  8. Audrey BarberNo Gravatar says:

    I agree with you. Like the part where you said, “always take from them.” That’s why I think it’s ok for lesser than successful people to take food stamps, or any other welfare program that is offered…..like Medicare and SS. Why should they let the rich live a life of ease and the others just sit here and suffer so that they can have another yacht added to their existing fleet.

  9. Nic LeoboldNo Gravatar says:

    I disagree that the free market could not step in and provide for everyone formerly dependent on government, or that that would be a problem. I think there’s an excellent chance that if all welfare programs disappeared overnight, a multitude of businesses, charities, foundations and individuals would step up and help out their neighbors and find efficient private welfare solutions. The rich especially would have tremendous incentive to do this, and they already do it anyway to a large degree. In the case that everyone was not taken care of, the only ones who would perish would theoretically be those who no one cared about or who had no kin, such as outcasts. And their misfortune would not be cited as proof against government because no one would care that they had perished. Anyone who had relationships and a place in the community would be taken care of. But even the outcasts, would likely be aided by the charities that rich people and businesses would set up. Rich people and businesses would, among other things, have a serious interest in preventing social instability. The disappearance of the welfare state would also vastly increase the incentive and pressure for big business to provide jobs for anyone desiring work.

    • Seth KingNo Gravatar says:

      I, too, am extremely optimistic about what free peoples can do. However, there are some things even the free-market cannot provide, like the Moon. Whether or not the free-market can provide the sort of care that the baby boomer generation expects in the aftermath of a currency collapse is asking a bit much. Possible, but unlikely.

      • AndrewNo Gravatar says:

        Obviously I cannot speak for all boomers, but I must say as one born on the front edge (1946) that many of my boomer friends and acquaintances who had previously intended to retire are choosing to continue working indefinitely and that most in this category are also ramping up their savings. Nearly all sense that something is rotten in Denmark. However, few have taken any initiative to extricate their assets from the banking grid, such as by buying silver or gold, minimizing their account balances, or expatriating some or all of their assets.

        That said, I do believe that the boomers as a whole seem woefully paralyzed, in denial, and unprepared. But then, so does the vast majority of everyone else. We shall see.

        Thanks for your article.

  10. CW OrangeNo Gravatar says:

    Personally I think we should all form Hanging Clubs, adding the names of the culpable to the list to be hung when the government falls. When it does happen, we must hang them with dispatch before another government can be reformed, and they get re elected to plague us further.
    I am a bandit myself, living overseas. I come home to the US to work for short periods adding to my funds. I pay no taxes now, have not paid for years, and do not feel guilty about not supporting the Ponzi scheme. I took retirement at 62 and thus have collected a bit of what I paid into the system before I wised up.
    I would like to see the USA broken up back into its component states.This is because I feel it is too big to govern as one unit. The juggernaut takes on a life of its own resisting sane control. Hopefully that will happen when it falls, and we can then keep any central government weak, not letting it aggregate power like now.
    I served over 10 years in the military but I feel no duty toward supporting the government or its aims. The siren call of nationalism has lost its effect as I realize I am not a number to be called up and expended in the service of the state. The smart thing to do is stay under the radar, live free, and enjoy what life I have left. Although, if mass secession were to occur, I would be sorely temped to return and man the ramparts keeping feds out of Texas. I may be getting old, but if I can see the target, I can still arrange a bullet hole in the location of my choice.
    CW Orange
    cw_orange50 at Yahoo.com

  11. JehuNo Gravatar says:

    I beg to differ. My difference is strictly based on the idea that constantly increasing state expenditures is actually playing a supporting role for poverty. Constantly increasing state expenditures serve to create an entirely artificial scarcity in what is otherwise an immensely productive economy.

    I hope you will reconsider you position on this. I am considering explaining how I arrive at this conclusion in a piece posted to my blog and to Gonzo Times.

    –Jehu

    • Seth KingNo Gravatar says:

      There is no doubt about it, the more money the government steals, borrows, and spends, the more poverty there is. The point I was trying to make is that at least the blame goes on the government when it happens instead of the free-marketeers. Furthermore, the more difficult the government makes it to do business in the white market, the more likely the producers are to switch the the black and gray markets.

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