Unlimited Debt Leads to National Bankruptcy

By: Jacob Hornberger

During the current debt-ceiling crisis, one thing should be painfully clear to everyone: For those people who are advocating an increase in the debt ceiling, there is no maximum amount of debt that is too much for them. As far as they are concerned, the federal government should continue adding to its debt burden indefinitely into the future, no matter how high the debt becomes.

How do we know this? Because they never tell us what their particular debt maximum is. Every time the new debt ceiling is reached, they pound us with all sorts of dire things that will result from a “default.” But once they succeed in raising the debt ceiling, it’s always back to business as usual, with massive spending exceeding tax revenues, which means more borrowing and more debt.

But the statists don’t care about that. They know that U.S. officials can just keep borrowing the difference and adding to the federal debt load. They also know that when the debt ceiling is reached again in three years or so, they can pull out the old “default” scare and use it again to achieve another lifting of the debt ceiling. They do that every time a new debt ceiling is reached.

How long do the statists propose that this go on? They don’t say. They never say. They just don’t care. As far as they are concerned, the federal government should just keep adding onto its debt load indefinitely into the future. For them, there is no maximum amount of debt that the federal government should not exceed. In fact, if the statists had their way, there would be no debt ceiling at all.

Why is there a debt ceiling? Because even Congress is implicitly acknowledging that too much debt is a bad thing, even a dangerous thing. When Congress enacts a debt ceiling, it is saying: “We have borrowed too much money as it is. This is the maximum amount of debt that the federal government can now incur.”

At that point, the government has, say, three years before it reaches the new debt ceiling. During those three years, it is incumbent on the government to slash expenditures so that expenditures equal tax revenues. In other words, no new debt because everyone knows that if borrowing continues, the debt ceiling is soon going to be reached.

But Congress never does that. It just keeps spending, spending, and spending — and borrowing, borrowing, and borrowing. Moreover, the statists who cried “Raise the debt ceiling!” the last time never advocate a slashing of expenditures and a reduction in borrowing. That’s because they know that they will be able to get the debt ceiling raised again when it is reached the next time by employing their standard default scare. 

That’s why Congress should simply stand fast and enforce the debt ceiling. There is no other way to force federal officials to slash spending so that the amount of spending equals the amount of tax revenues. In other words, no more additional debt.

Otherwise, at the end of this road is national bankruptcy. Just ask the people of Greece. Several years ago, they did what American statists advocate. They just kept spending and borrowing. They finally got to the point where their tax revenues were insufficient to pay the interest on their debt, their welfare-state programs, and other governmental expenditures. Owing to its large amount of debt, the government was bankrupt.

The Greeks ended up getting bailed out, but there is no one who is going to bail out the United States. Ultimately, bankruptcy is what awaits the U.S. government and the American people. We don’t know how much debt gets us to that point, but we do know that Congress itself has repeatedly said “No more additional debt” and then raised its own self-imposed debt ceiling again and again.

What will federal officials do if bankruptcy comes? Well, you can rest assured that the national-security establishment — the Pentagon, the CIA, and the NSA — will not permit any reduction in its largess, on grounds of “national security.” Neither will Social Security and Medicare recipients, on grounds that they will “die in the streets.” So, the three largest expenditure items will be off the table. 

But also rest assured: All the other people and entities that are on the federal dole will fight just as vociferously to maintain their dole. They’re not about to give up their largess without a fierce fight.

That means that federal officials will be voraciously seizing whatever money they can find to keep their dole recipients happy. That’s when those 87,000 new IRS agents will come in handy. No one should be surprised if they go after the low-hanging fruit first, such as 401(k)s and other retirement monies. That’s what the Argentine government did when it went bankrupt as a result of too much debt.

What will the statists say when bankruptcy day comes? I guarantee you: they will blame the crisis on the failure of America’s “free-enterprise system” and will be ecstatic that bankruptcy is equalizing everyone by making everyone poorer. The last thing they will do is accept individual responsibility for their own role in this destructive debacle.