The Phony Debt Crises

The Phony Debt Crises

So, President Joe Biden (D) and Speaker of the House Kevin McCarthy (R-CA) negotiated a “last minute” agreement to save the nation from default and economic ruin. What a bunch of crap, overrun with last minute theatrics. This is what substitutes for leadership, open and honest dialogue and competency in government.

There really is not anything more to say about Mr. Biden that I haven’t already said. He is simply not competent to serve as President of the United States – not now, not when he first entered public service over fifty years ago and not anywhere in between. While virtually anyone can be elected president, few are qualified to serve.

I’m not fan of Mr. McCarthy either. Unlike Mr. Biden, I think Mr. McCarthy is well meaning but he has become ensnared in the cocoon of Washington, D. C. and either lacks the courage or the intellectual capacity to challenge the status quo. In previous columns I have said the following about Mr. McCarthy:

“The Republican ranks of the House are replete with smart and articulate members who both understand and embrace a conservative agenda. On the other hand, Mr. McCarthy – the likely next Speaker – is a reed blowing in the wind. Unlike former Speaker of the House Newt Gingrich (R-GA) who laid out an aggressive agenda of change based on conservative principles, Mr. McCarthy set forth a list of glittering generalities with no clear path towards achieving them. Instead Mr. McCarthy chose a bold plan for Republicans:

• An economy that is strong

• A nation that is safe

• A future that is built on freedom

• A government that is accountable.

“The only things missing are: ‘do good and avoid evil’ and ‘brush your teeth before going to bed.’ Who can disagree with these generalities? Even more importantly, who can define whether an actual piece of legislation approaches let alone accomplishes any one of these “goals?”

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“And as good as he (Mr. McCarthy) may be at fundraising, he is that bad at negotiating as evidenced by the fact that he lost virtually every battle with Ms. Pelosi. There is a particular skill in negotiating and one of those skills is to be mindful of the end result and the long term consequences.”

This scam starts with a doomsday message of default – the national and world economies will collapse if there is a default – that then drives the whole conversation. You should have been suspicious of the actual threat of default given the fact that Mr. Biden has known of the approach of the debt limits ever since he took office and has not until the middle of May even looked at possible solutions. Like his campaign for the presidency he simply hunkered down in the basement of his home in Delaware and did absolutely nothing – nothing except make the problem materially worse by insisting on even more deficit spending. I’ll give credit to Mr. McCarthy that he was at least talking about the debt ceiling back in January when he became Speaker. Not that he had any real solution, nor did he lead his caucus towards a solution until April. And even at that the solution wasn’t much of a solution because it failed to address the underlying cause of the debt ceiling as well as the ongoing raging inflation – gross deficit spending that was being undertaken by Democrats not for purposes of reinvigorating the economy but rather to increase recurring expenses knowing full well that it would simply increase the “baseline” for future budgets using the Current Service Level (CSL) budgeting process.

CSL assumes the current level of spending is appropriate and that it should be grown annually by growth in inflation, population, beneficiaries, etc. It’s what the Democrats want – bigger government, more people dependent on the government. It’s what the public employee unions want because it results in more income from dues payments which they can use to increase their campaign contributions mostly to Democrats to ensure that these rounds of increases never stop. And while they all deny it and come up with clever alternative titles – even their version of “zero based budgeting” – they are, in fact, a form of CSL and a guarantee of increased spending dependent on factors other than need, efficiency, cost containment, and measurable results that indicate that the expenditures are accomplishing defined goals. And all of that spending increases annually regardless of the underlying financial well being of the economy in general and the economic realities of America’s great middle class.

Let us assume that the agreement to suspend the debt ceiling had not been reached by the June 1 deadline.* First, the debt crises was composed of two parts – payment of the principle on existing bonds that became due on or before June 1, and payment of interest on all other bonds. The bonds coming due on or before June 1, could be refinanced by the issuance of new bonds without increasing the debt – in essence you would pay a $1,000 bond by issuing a new $1,000 bond and using the proceeds to pay for the former. It is a common practice in business to “roll over” debt by issuing new debt and it can generally be accomplished without raising the gross amount of debt. If the politicians and the media thought this was cause for cataclysmic concern then they should be dismissed for not being able to distinguish reality from propaganda.

The payment of interest is a different story. It requires real money – either that which is in the treasury or which will come into the treasury prior to the payment date. Since the payment dates for the interest on these bonds come due at various times spread out over each year, it is safe to say that all of the interest accumulated was not due on June 1 as Mr. Biden and Congress allowed us to believe. Nor did it take into account that there was going to be a substantial influx of quarterly tax payments arriving on or before June 15 which, handled properly, would have ensured that no default was had.

And to further enhance the certainty of a continuing cash flow to meet our debt obligations budget cuts could have been introduced by Mr. Biden throughout the programs administered by his massive bureaucracy. Most large corporation have to periodically undertake such exercises when revenue and expenditures do not meet projections. In my twenty years with the telephone company I probably did this at least a dozen times. It can be accomplished by mixing and matching the following:

• Hiring freezes – do not fill open job openings and do not refill positions due to terminations and/or retirements
• Travel restrictions – in a post-COVID world we learned just how to conduct virtual meetings at a small fraction of the cost of literal meetings (travel, housing, food, etc.)
• Gathering, sorting and distributing internal data. Much of what is gathered, sorted, and distributed is done based on historic practices rather than current needs. Review and eliminate based on current usage.
• Furloughing non-essential personnel – you can simply go through the lists prepared by the federal government during COVID to identify non-essential personnel.
• Eliminating non-essential functions – most would be found in those functions that prepare, gather, sort and redistributed internal data. This could lead to a full review of the various functions performed for internal consumption by all levels of government .
• Then there are the “savings” designed to punish the public – closing national parks and government building, furloughing federal employees for needed services (air traffic controllers, park rangers, etc. This became known as the Obama method of making people suffer when he didn’t get what he wanted.
• Freeze bonuses.
• Limit the use of military planes for executive and congressional travel. There is no reason to transport Mr. Biden back and forth to Delaware every weekend so that he can take a nap in his Rehoboth vacation home.

The list is not intended to be inclusive rather it is a start point for individual senior managers to apply their own identifications of savings consistent with those guidelines.

The remaining option is to embargo payments for programs initiated since the commencement of the COVID pandemic – particularly the hiring of personnel which creates a recurring expense forever. In this regard one would start with the 87,000 IRS agents authorized under Mr. Biden’s deficit reduction act which according to the United States Department of Labor’s Bureau Statistics would save over $180,000 per position annually for a total of $15.55 Billion annually. It can continue with the elimination of the student debt forgiveness program resulting in a savings of $30 Billion annually. Then move on to eliminate the amounts being spent to assist the 20 Million illegal immigrants including food, shelter, clothing, medical care, education and transportation which using New York Mayor Eric Adams figures of $65,000 per capita would result in annual savings of $1,300,000,000,000,000.00**. If the advocates for illegal immigrants knew that there would be no welfare payments for the illegals and that they would be turned back at the border, the current deluge would fall to a trickle which the United States Immigration and Customs Enforcement (ICE) and the drug enforcement agencies can track, interdict, prosecute and deport with ease.

The point is that this crises was a political machination and had nothing to do with actual possibility of a default. It, like most things Mr. Biden and the Congress do are about getting elected and re-elected. Until this president and a sufficient number of members of Congress are defeated in the next election cycle, this charade will continue. And while these political leaders can stand around and thump their chests about how they averted a “crises” they, in fact, have created this crises and did nothing to solve it. They kicked the can down the road again. Morons.

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*The June 1 deadline was as phony as the crises. Originally we were told that the deadline would be in September and then all of sudden it was June 1, and then it was June 5 and then it was June 8 which would have changed again had they not had the theatrics resolved for announcing the agreement by June 8.

** That figure his high because not all illegal immigrants stress the welfare system to its full extent but the figure is within the order of magnitude.