Rand Paul's Misgivings on Government Debt (James E. Miller)
Monday January 14th, 2013
In its never-ending struggle with responsibility and logic, the U.S. government will soon breach its statutory debt limit. Departing Treasury Secretary Timothy Geithner has warned President Obama that by the end of February, Congress will have to take action or risk a sharp halt in Empire Washington's hegemony. The so-called conservative side of America's res publica is demanding large swaths of government spending to be cut in return for a hike in the debt ceiling. Such spending cuts won't, of course, happen for fear of the mob's reaction to a decrease in state benefits. Several progressive economists are pressuring the President to pursue a number of accounting schemes to make steady the government's downward path to bankruptcy. In typical hedonist fashion, their focus lies on short-term pleasure for long-term destruction.
Amidst this mindless squabbling is the underlying assumption that the national limit on borrowing will be increased. Any fight between politicians concerning the protection of taxpayers is always kabuki theater. The state lives by the slogan "the people will be plundered, come hell or high water."
In response to the debt ceiling mire, Rand Paul, the libertarian-leaning Senator from Kentucky, is attempting to force the hand of President Obama and his leftist allies by advocating legislation that would prioritize the government's payments should the nation's credit limit not be extended. In order to reassure financial markets that Uncle Sam will make good on his debt, Paul is pushing his party to pass a law that forces the President to "pay our interest, make Social Security payments" and "pay soldier salaries." Paul's idea, while it may stave off a revolt by creditors, is standard fare for right-wing lawmakers. In the summer of 2011, a similar bill was introduced by hard-line conservatives in the House of Representatives. The theory behind this legislation is while government may spend rashly like some childish drunk, certain personnel need paid to ensure a smooth working order so the state is able to thrive within its means.
The belief is not only destined to failure based on everything we know of the nature of government, it blatantly contradicts its own purpose. If anybody in Congress truly wanted to right the disastrous course Washington is taking the country on, the three groups kept safe by Paul's plan should be the first to shortchange.
Debt repudiation, though a radical measure in term of effectiveness, is the most justified recourse to follow when it comes to government debt. The state is a coercive, predatory agency. When it borrows money from private lenders, the promise to make good on payments is backed by the threat of pillaging taxpayers. To continue acquiring loans to be paid back at some future date is to enslave a society with the weight of a commitment they had no hand in choosing and have little choice but to honor.
In addition to the immoral character which applies to government borrowing and taxation, the spending of every dollar by state officials acts as a drag on the private economy. The state must acquire resources before it puts them to work. That means every dollar spent by the political class means one less dollar for actual producers of wealth to use. Unlike a private transaction where both parties benefit ex ante, government dealings always result in someone worse off on the net because of the coercion involved. Bringing the run-up of national debt to an immediate standstill would free society from the state's machinery of wealth destruction.
By stiffing creditors, the U.S. government would forever tarnish its reputable standing among lenders. Lenders would demand a higher cost for Washington's insatiable appetite for borrowing money. Government spending would have to be slashed quickly and to a high degree. Uncle Sam's finances would be in turmoil but the private economy would be freed of the black hole known as state expenditures. Anybody unwise enough to lend money to a centralized government is in no position to complain when they are denied interest payments or the principal in full. As Murray Rothbard writes,
The public debt transaction, then, is very different from private debt. Instead of a low-time-preference creditor exchanging money for an IOU from a high-time-preference debtor, the government now receives money from creditors, both parties realizing that the money will be paid back not out of the pockets or the hides of the politicians and bureaucrats, but out of the looted wallets and purses of the hapless taxpayers, the subjects of the state. The government gets the money by tax-coercion; and the public creditors, far from being innocents, know full well that their proceeds will come out of that selfsame coercion. In short, public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future.The same principle applies to the terribly unfunded Social Security program. According to the 2012 Annual Report of the Board of Trustees, the entitlement program is running a projected deficit of $165 billion for the year of 2012. By 2033, income from the entitlement's trust fund will have run its course. After this point, benefit payments must be reduced and retirees then defaulted upon. Payment becomes dependent on whether the government isn't too bogged down in its other, more expensive entitlement programs. Economist Lawrence Kotlikoff of Boston University estimates the present value of the U.S. government's unfunded liabilities is $222 trillion- an unfathomable number which by itself confirms a looming reduction of benefits to be paid. As Gary North puts it,
Anyone who says that the Social Security system is not going bankrupt is either a liar or an economic ignoramus. Take your pick.Today, U.S. workers are being fleeced to pay for an increasing amount of retirees. Continuing normal operations for an entitlement program like Social Security is a vast injustice for non-beneficiaries. The U.S. Supreme Court has already ruled that contributors to the program have no contractual rights to subsequent benefits. Should the Social Security system go belly-up, prospective retirees are left with nothing.
By withholding benefit payments now, it would send a definitive signal to workers that Washington won't be there to write checks in their golden years. Those reliant on the program would learn a valuable lesson in statist deception and bribery. A political revolt would force Congress to reform the system in way that might allow young adults to opt out. Whatever the case, salvaging the entitlement only means prolonging the suffering of some. Social Security was never voluntary, contractual, or established on sound financial grounds. In other words, the system is unfit to exist in a perfectly reasonable world.
Lastly, there are the salaries of active duty U.S. troops. Not only should payment of their salaries cease for budgetary considerations but also for the sake of national security.
Now it may be said that I don’t “support the troops.” My only reply is that of course I don’t support the murderous swine who are killing innocent men, women, and especially children. I don't support the hundreds of thousands of able-bodied men who are destroying the lives and property of foreigners as a tribute to their own fanatical nationalism. And I certainly don't support the systematic theft used to pay for overseas adventures in destruction.
The plain truth of the matter is that American forces are doing nothing to protect the liberties of their countrymen. In fact, their actions have resulted in an accelerated erosion of freedom and security. The relentless campaign of torture and annihilation that is the War on Terror is actually cultivating anti-American sentiment. Residents of the Middle East, mainstream news outlets, and the Pentagon all confirm this notion. Logic says that if you kill someone's family member under dubious assumptions, they will hold a grudge for the rest of their natural life. As Glenn Greenwald writes,
...continuous killing does not eliminate violence aimed at the US but rather guarantees its permanent expansion.Anyone in the armed forces with a quarter of their brain still functioning realizes the utter worthlessness in their job. They are sent overseas to keep watch over armaments whose sole purpose is to vanquish life by the quickest means possible. Or they are tasked with training a bunch of culturally-backwards peasants to fight people of their same creed, race, and nationality. Why it hasn’t dawned on these freedom fighters that such tasks have nothing to do with national defense is beyond the scope of this writer.
A solider is either a man of murder or a glorified popinjay. Neither deserves the support of someone who holds basic decency as a virtue. Cutting off the salaries of troops would tell prospective recruits to think twice before enlisting. It would also serve as an incentive for current troops to discharge themselves and pursue a civilized career rather than put future generations at risk through the carrying out of senseless violence.
Only a fool believes a politician who professes a desire for fiscal responsibility. Senator Rand Paul's debt ceiling proposal is no exception to this rule. By adopting Paul's plan, business-as-usual continues unabated for Washington’s criminal class. Each of the groups that benefits from his proposal is doing an inestimable amount of harm to the average person. They are all contributing to the country's financial and moral degradation. Rand Paul may be the son of the last honest man to ever vote in Congress, but his position is thoroughly statist. It will only embolden the government’s rapaciousness, not skewer it.
James E. Miller holds a BS in public administration with a minor in business from Shippensburg University, PA. He is the editor-in-chief at the Ludwig von Mises Institute of Canada and a current contributor to his hometown newspaper, the Middletown Press and Journal. He currently works in Washington D.C. as a copywriter.