04 February 2011

When you don't raise the debt ceiling

Not raising the debt ceiling is not defaulting on debt: it is defaulting on new spending.

Actually it is not even defaulting on that, but ending contracts via a Termination For Convenience of the Government clause in each and every contract the federal government gets into.  It is an 'unwritten' clause that need not be put down to be present in the contract and that is by statute: you are responsible for knowing how the government contracts and that there are unwritten clauses in every contract.

What does a T4C do?  It ends the contract.  No further payments, no penalties and no recourse against it.  The federal government as a sovereign power has that ability while you do not.

So if we don't raise the debt limit what would the government have to do?

First it still takes in approx. $2 trillion in revenue a year, and 1/3 of that goes to service our current debt.

Now you have $1.33 trillion left to deal with everything else.

The shortfall is about $1 trillion (give or take on the wild spending spree that went on from 2008-2010).  Not all of the spending spree money is spent, so that should have its obligations canceled under a T4C and returned to the Treasury.

Next up: cuts.

I don't like across-the-board cuts as that leaves the overburdening structure in place to resume its spendthrift ways if we can dig ourselves out of the fiscal hole.  I propose structural cuts to the federal government, reductions in military outlays for non-active war fighting operations, and entitlement cuts,  plus a clean-sheet, one rate tax code with no exemptions for anyone for anything on income.  What you buy, sell and do are your business and nothing is special enough to warrant an exemption.

What goes?

The Dept. of Agriculture is a subsidy and cash transfer system for large agribusiness to the tune of over $700 billion which includes overseas offices. It can go.  There are many fine State standards that will fill this role, like PA.

The FDA thinks that the cost of a drug changes its efficacy, and that is a lie, so it can go.  If they can't be truthful about their main mandate, it is not worth having.  Let the manufacturers know they are totally on the hook for safety and efficacy.

EPA believes carbon dioxide does not get picked up by plants for processing of sunlight into plant cells, but instead lingers forever in the atmosphere.  It can go.  The States duplicate much of the actual regulatory environment, anyway.

The FCC was made for a 1930's problem solved by 1990's technology and is now obsolete. It can go.

The SEC can't pass a GAO audit... since 2004... and now gets FOIA exemptions. It can go.

The Dept. of Education has not changed the literacy rate by 5% in the positive direction since it was started, and the current rate dates back to when Johnny Couldn't Read.  It can go.

We have had the Dept. of Energy through at least 2 energy crises and still cannot get us cheap and plentiful energy.  It can go.

National Endowments for the Arts/Humanities produce feces filled, irreligious works that are of no benefit to anyone.  Starving artists need to find real patrons, and get off the government teat.  They can go.

UN payments.  Why do we have this?  It hasn't brought world peace and only fostered dictatorships and tyrannies across the globe.  It can go.  Ditto foreign aid to non-friends and allies.

The Federal Reserve needs to be audited and asked why it devalues our currency, contrary to its mission.  It must go.

IRS needs a 'right sizing' when a new tax code comes in that is clean sheet.  Throw in the BATFE with that as it has proven remarkably effective at harassing law abiding gun shop owners and has, itself, allowed weapons to be sold to straw purchasers with the guns destined for Mexico.  If Congress really wants a tax on imported alcohol, then it can become the BA or BAT.  I would suggest eliminating the entire bureaucracy and doing the clean-sheet tax for the revenue involved, but moralists love their sin taxes.

Medicare & Medicaid - add up, divide by 2, block grant to the States with no overhead, phase out over 5 years.  Let the States figure it out, if they can, since the federal government has made a hash out of it.

Social Security - you do not have an 'account' but a promise of future payments for your tax money.  That is not even a contract but on sufferance of Congress.  Anyone in the system stays in and the SSA goes into the general expenditures part of the budget.  FICA is eliminated as part of the clean-sheet tax system.  No one pays into SSA any more and those in it have until their 'accounts' are exhausted.  If you make the argument that it's an 'account' then that is very fair: your account goes, so you go off the system.

Military bases in Japan, Germany, UK, S. Korea all can go, save if they are in the direct logistical train for current war activities, and even then shifting from high cost bases to cheaper ones elsewhere is necessary.  Stretch out refurbish times for aircraft carrier battle groups and reduce the active Navy forces for that.  Shift tactical air operations to the ground forces and make the USAF responsible for strategic forces and orbital surveillance, and remove multiple spy platform agencies from the government.

Throw in an across-the-board pay freeze and reduction to 2006 levels for the remaining workforce.

How to get rid of these things?

Don't fund them.

Then GAO takes control of their lands, buildings, offices, supplies, equipment, etc. and the National Archives takes the paperwork and documents.  Everything else is sold off at auction so the government gets a year or so of revenue from those big ticket items.

While the statutes and regulations remain 'on the books' with no one to enforce them they are not followed, and as the agencies and departments go away, any ability to enforce them are put on the DoJ, and it will not have the time, manpower, money, nor size to do so.  Thus getting rid of the enabling legislation via a 'sunset' law for all laws and regulations would look like a great idea.

With all of that stuff gone and a simple tax code in place, we can easily pay down our debt and not get into more debt, thus reducing future payments as old debt is paid off.  The 'debt ceiling' should be lowered with that, also, as we don't need that much debt.

The idea that $2 trillion isn't enough to run ANY government is asinine.

If it can't be done for that then it can't be done for ANY amount of money as no one knows how to be thrifty on the spending end of things.

Of course politicians would muck up not raising the debt ceiling: they are good at politics, but suck at economics.

Yet pure and harsh austerity will set us free from debt.  Not immediately, but not getting NEW debt is vital.  In 30 years it will all be gone and you will have given your children and grandchildren a better and more solvent country.

Or you can make them paupers indentured to the federal government.

That choice is yours, and that of your representatives in DC.

Choose wisely.

You may live to see that day when they either thank you, or spit at you, and what you do now will determine what you get, then.


1389 said...

Sounds like a plan!

A Jacksonian said...

My thanks!

One of the benefits of having been a government bureaucrat on the procurment end of things is knowing that the government can default on contracts with no repurcussions. This is true of all promises to pay out by the government, including SSA, Medicare/Medicaid... you name it, and if it isn't debt servicing the government can stop it pretty much immediately. They have their duties for the military, border enforcement, the mint, USPTO, USPS and a few other items (like paying the Judicial, Legislative and Executive staff plus Ambassadors) but beyond that?

Cut all the stuff listed and you will balance the budget.

Turn all medical help over to the States and we can cut HHS down to size, then get rid of it when SSA turns into a payout for current individuals drawing from the system. The States would know they have a few years to deal with medical care and if they don't want to handle it, then they are free to do so. All of our 'help' has inserted middlemen into the process, put a subsidy system in place, and caused a massive cost shift via government not paying the full amount of medical bills when it 'helps' people. This must end.

We do have what Jefferson wanted: the ability to clean sheet government, but every 2 years instead of 20. This is something we can utilize in a civil way... if we dare to be free.