We are not going to go any higher
Yesterday Day 5 of debt ceiling negotiations came and went between the president and Congressional leaders. No compromise was reached and it appears that we are still in a stalemate. So, where does this leave us as we loom ever closer to the August 2nd deadline of raising the debt ceiling for the federal budget? We are joined on the line by David Bradshaw, the editor of Real Money Perspectives, a daily financial/market news digest.
Yesterday came and went, nothing was formally reached in terms of an agreement between the president and Congress, at least the Republican side of Congress. But Republicans came out with a very interesting twist, and I’d like to get your take on this: they proposed a balanced budget constitutional amendment. Is this legitimate? Is this a feasible rationale to put forth?
It is actually something that we proposed as one of the seven solutions in the most recent book published The Inflation Deception: Six Ways Government Tricks Us.. ..... And Seven Ways to Stop It! Is it viable? It probably has maybe a 15-20% chance of gaining an attraction, but I think it would definitely be a step in the right direction. It seems to me the debates that are going on are focusing around the wrong thing. What we need to be doing is looking at lowering the debt ceiling, not raising the debt ceiling.
How is that going to be sustainable if the government is expected to pay out its financial obligations as we get closer to the August 2nd deadline? Are you saying it’s ok not to raise the debt ceiling and possibly to go into some sort of default?
Let’s look at it on a personal level. Let’s say if you or I have a credit card limit or a limit on borrowing against your property or something like that, if the bank imposes a limit you can’t go above and just keeps raising it higher and higher, it teaches us that there is really no debt limit. The debt limit began in 1917, so that the Treasury could independently issue debt. So, what we have right now is that the debt is traveling at such a velocity that it threatens to crush the entire economy, unless somebody draws a line in the sand and says we aren’t going to go any higher.
But what are the immediate consequences for that? I do understand where the Republicans are coming from in terms of their desire to curb government spending, I get that. But what do you tell elderly people, people with disabilities? That they may or may not get their checks next month?
I do think that has been thrown around as a threat for political reasons. There could be some and there would be some short-term paying. We will probably see interest rates rise, particularly if S&P or Moody’s follow through with downgrading the US debt. But the long-term message that would be sent is that we are doing something to reduce our run-away debt and deficit, and I think it will move longer term to reestablish confidence, which is what the whole economic system is based on. It used to be based on a gold standard. Then we went to a credit standard and a debt standard, and people are losing confidence in as it’s accelerating pace. And what we need right now is, in essence, to be willing to take some short-term paying for some longer-term gain to reestablish our US dollar, which has been falling dramatically over the last decade.
You talk about restoring confidence in the markets. Moody’s and Standard&Poor’s, some of the leading credit agencies have already expressed concern and they have already said that the US credit rating is going to be under review, if these negotiations continue to stall and an effective solution is not reached. We talk about long-term goals and long-term confidence. If our credit rating is compromised from the current status of AAA, which is best in the world, why in the world would we do anything to compromise that? That would hurt us short terms and long-term if our credit ratings go down?
I know your network is committed to the truth. If the truth is, we are not creditworthy, we are not able to pay our debts, we are not able to live within our means, then maybe our credit rating needs to be lowered. I notice it may sound harsh, but just even look in Russia – your growth right now is surpassing the US, your inflation rate is probably on the same level as the US, your pensioners are facing the same kind of problem with inflation robbing them their wealth. The only way that the US would, which holds the world’s reserve currency rate right now, is going to restore faith in our nation is to begin to take steps of austerity – something that we for some reason felt we are above the law for doing that. I think this could be a turning point in our country to draw line in sand, as I said, and begin to live within our means. Something has to be done and just kicking the can down the road, making compromises, raising taxes, which we know won’t work, is not the solution; compromise is not the solution. We need to a new direction. There is an old saying “if you do what you have always done, you will get what you have always got”.
You said compromise is not the solution. If there is no compromise, where does that leave us?
You mean in raising the debt ceiling?
In coming to an agreement about what is going to be done. I think, historically, as we look back, the politicizing of raising the debt ceiling is new, this is something that has not previously happened, at least not to the degree that we are seeing it play out right now. And I think the Democrats find themselves on their heels, because they seem to be very surprised that this is even up for debate.
True. But what we get promised whenever we come around these urgent deadlines is that many things are promised and the spending cuts never come. So, I certainly hope that the Republican Party stands up to the Democrats on holding the line against raising the debt ceiling. Will they come up with the compromise? Will it smooth things over and this will become a nonce story 60 days from now? I don’t know. All I know is that the US is morphed into an inflatocracy, which is a government that is of, by and for inflation, debasing the money as a means of social engineering. It doesn’t work, it hasn’t worked, and not only are we picking the pockets of Americans, as Washington continues to debase our currency, but it is also picking the pockets of Germans, Chinese, Brazilians, South Africans, Russians.
To get back to what Speaker Boehner and many of the House Republicans were proposing yesterday – I even saw some of the freshman GOP Senators in a press conference yesterday – they were really pushing for this balanced budget amendment. Is it the GOP’s plan to make sure that something is passed by August 2nd at least to get the President to agree to a balanced budget amendment?
I think it would be a break through if we could get the president to agree to a balanced budget amendment. Virtually, every state in the US has some type of a balanced budget. But when it comes to the US budget, we seem to believe that we are above the law. And looking at your own president, President Medvedev has recently said that he is going to cut government services by up to 20% in an interview with the London Financial Times. I’d say he’s moving in the right direction. I’d say the sun is rising in the east and it’s setting in the west, unless we begin to make some very difficult, politically incorrect decisions from the standpoint of political status quo. Right now the whole argument is about compromising on raising the debt ceiling. As I said earlier, I believe the real issue here is that we need to be looking at that we don’t need higher taxes, we do need more people employed that are paying taxes. So I would be tickled pink if we could get a balanced budget amendment really seriously discussed.
You raised two very interesting points as it relates to making some politically incorrect decisions, as it relates to government spending. A recent poll has been released saying that nearly one in six Americans, 18.6% of all Americans, receive some sort of government assistance, whether that comes in the form of food stamps, MediCare, MedicAid, social security or most importantly right now, I believe, unemployment payment. Do you suggest we cut the help for these people who need these services in the worst way?
No, I’m suggesting that when we start talking about cutting, we start looking at cutting pay and benefits to government workers, for example. We forget that during the Great Depression here, back when your network began, in 1929, Franklin D. Roosevelt cut pay and benefits for federal employees by 20-25%. And what we seems to forget is that we need to look at the government as something that begins from within and works its way up rather than starts from the top and works its way down. We try to communicate that this law of self-government, family government has manifested itself in a government that has run a mark right now in spending and in seeing itself as the solution, rather than, as Reagan said, the problem.
We had two terms of President George W. Bush, and I don’t know if you would agree or disagree but it seemed that a lot of President Bush’s agenda as related to the economy was accomplished. He enjoyed a full terms, four years of Republicans in the White House and the Republican control of Congress and the Senate. Over the course of the Bush Administration taxes were cut, regulations on business and on Wall Street were eased. And it seems that everything that the GOP agenda is pushing for now to stimulate the economy – they had that under Bush, and the economy tanked. So, can you tell the country why in the world would they want to return back to those policies that crippled the economy in the first place?
I’m not on your programme to defend President Bush. He made good decisions, bad decisions. The political direction and the Republican influence had a positive effect in some ways, and yet Bush, like his fellow Democrats, continued to expand the debt ceiling, continued to spend more. So, what I think the point we are at right now is that we really need to move beyond left-right politics and move into a crisis mode of how the American people are going to take back our government from both parties and begin to come up with a solution that doesn’t involve stealing more of the wealth through higher taxes. Te House Republicans, I think, would be foolish to compromise with the Obama Administration and leave American taxpayers on the hook for more out-of-controls spending in the future. So, we are at a crossroads and we need some clear direction, and I do believe that men like Congressman Ron Paul are offering out-of-the-box proposals and solutions – he has one currently circulating, which is entitled Cut, Cap, and Balance. And I think this is the direction I believe our country needs to go.
In the short term, in the immediacy of these negotiations, with the August 2nd deadline looming, whether some people feel that this date is legitimate or not, what would you like to see happen? What should the president give up and what should Republicans give up in order to come to a solution?
I think it’s quite likely that we’re not going to come to the point where either one or the other is going give up the core principles. So, my hope is actually that we do not come up with a compromise, that we do find that the solution lies in a completely different direction and that is by lowering the debt ceiling and moving in the direction of getting our nation back on the solid foundation. All of this is discussed in our new book The Inflation Deception, which is found at the InflationDeception.com. In fact we are offering for listeners interested in doing a review on the book a free review copy, because we are committed to getting this message out, not just in selling books. “History has largely been the history of inflation”, Friedrich Hayek said, “usually inflations that are engineered by governments for the gain of governments”, both parties. So, what we need is an entirely different approach to our debt. We need to look at our debt as a drug that has morphed it a worldwide money system that is causing the middle class to be crashed, as Lenin said it would, and we need to take some serious steps against it. And as I said, there may be a shot term pay in this but in a long term, if America is to continue to lead the world, we have to make the top decisions.