Five months ago I encouraged you to keep an eye on the Statutory Debt Limit in the United States. My premise is that the “debt ceiling” indicates how seriously members of the US Congress and Obama Administration take fiscal responsibility.
Since then the partisan bickering has escalated while a general consensus is not whether the limit will be raised but by how much and under what conditions.
It is clear that the majority of political participants cannot be entrusted further with finding a resolution. It is time to appoint a Receiver.
Debt Caused By Excessive Spending
First, consider why law-makers want the ceiling raised.
The Bush and Obama Administrations committed to excessive spending, financing US wars abroad, bailing out various politically-preferred enterprises and launching several economic “stimulus” programs which have failed.
Already on a rising trajectory of spending for several decades the deficit budgets justified by a clearly-defunct Keynesian economic theory have contributed to a US debt load that approximates Gross Domestic Production.
The new debt ceiling, if it is raised to the level requested by President Obama, will be close to $17 Trillion or about 115 percent of GDP. That is in the range of debt burden currently experienced by Greece, a basket-case nation being bailed out by the rest of Europe.
Spending at this level cannot continue. Government needs to be downsized and workers need to be fired. The face-saving political tactics serve only to mollify the Unions and other sources of electoral votes. The joy will be temporary because eventually the piper must be paid.
The Role of Receiver – Determining Total Debt
It would be honest and practical if the Supreme Court could be convened to place the US government in receivership.
The tremendous debt load, currently about $14.3 Trillion, excludes numerous contingent liabilities in the form of government guarantees and liabilities under the various entitlement programs. The Receiver would determine the total debt, bringing it fully into the light of day.
The Role of Receiver – Liquidating Assets
There is an immediate problem with respect to paying interest on Treasury bills and meeting other recurring payments such as Social Security and Medicare obligations.
If the annual tax revenue of two to three trillion dollars is not sufficient to meet current obligations then an asset liquidation program is required. The Receiver would identify surplus assets and liquidate them. The proceeds would be used ultimately to retire debt.
The Role of Receiver – Restructuring
Finally, the Receiver would bring forward a restructuring plan. Elements of the plan would include defining the areas of operation going forward.
The plan would need to address the commitments to members of society who have been plundered all their lives with the false expectation that the government would look after them as de facto wards of the state.
Those who, in normal circumstances, still look forward to full adult lives should be put on notice that their government cannot perform the business of planning their lives for them. This would entail the definition of a proper role for government.
No New Laws
The Judicial branch rounds out the separation of powers in resolving disputes. This original purpose should be revived as numerous Supreme Court decisions may be required to rescind inappropriate laws motivated by partisan courts of the past.
It is appropriate therefore that no new laws other than those arising out of common law practice be created.
A receivership engagement of this magnitude would be a formidable task. However, until the members of Congress show recognition that profligate spending and economic intervention are the root causes of the burgeoning debt problem, it remains a necessary task, no matter who is charged with addressing it.
©Copyright 2011 Edward Podritske