A Plea For Common Sense
Dear Tea Party Congressional Representatives,
In 2010, a group of conservative, libertarian and populist voters revolted against a consortium of moderate Democrats and Republicans who had slowly been chipping away at the rights of everyday individuals for roughly twenty five years. They were right to do so. The Senate and the House of Representatives had gone on a paternalism, spending, and later anti-terror binge that marginalized the rights of citizens in the name of getting people in far-away states to live the way that Washingtonians (and many elite people from the East Coast, generally) thought was best for them.
Some of the Washington paternalism goes back to Federal legislation on drinking. In 1984, Congress passed the National Minimum Drinking Age Act, which required states to raise their drinking ages to 21 if they wanted to receive federal highway funding. The legislation was sponsored by a New Jersey senator. New Jersey had a drinking age of 21, and the senator felt that it was in the interest of public health for all states to also set their drinking age to 21.
Raising the drinking age had undeniable public health benefits- but was it really fair for an establishment New Jersey Senator to override Wyoming's or Wisconsin's legislature and take away a 19 year old's right to drink? Well, if the federal government (also funded by Wyoming and Wisconsin taxpayers) was funding your highways, the Senate could claim this power. And eventually, the NMDAA forced every state to raise their drinking age to 21.
Washington's moderate Democrat and Moderate Republican paternalism continued. It legislated a federal ban on assault weapons for ten years. It forced states to reduce their definition of drunk driving to operating a vehicle with a BAC of .08. Five months ago, the NTSB has recommended reducing this to 0.05, although this recommendation is still pending Congressional response.
During the 1990s, Moderate Republicans and Moderate Democrats in Washington struck a series of trade deals that forced blue-collar employees to compete against low-wage Mexican and ultimately Chinese workers. CEOs and investors on the coasts got rich, while factory line workers in the Midwest got laid off. There are great economic arguments for free-trade, but they are predicated on internal wealth transfers for everyone to be better off. These wealth transfers never occurred, and working people in the rust belt got screwed even as the US GDP increased. (Even then, it's probably also a lot more uplifting to work for $15/hour 40 hours/week than to receive a government check for $20,000/year)
Then September 11th happened. It was a shocking, terrifying, and heartbreaking day, but Washington DC overreacted with the Patriot Act. It authorized roving wiretaps, abridged habeas corpus, and authorized searches of business records while forcing unwitting business-owners to keep the searches secret under criminal penalties. A group of far-left and far-right politicians bravely opposed the bill, but ultimately failed against a coalition of moderates willing to sacrifice liberty for a little temporary safety. Later the same coalition would authorize the US to invade Iraq over the objections of libertarians on the right and the far-left of the Democratic party. And the NSA would use provisions of the Patriot Act to tap into the private Facebook conversations of Americans without the knowledge of the public.
The same moderate Democrats and Republicans would preside over a failure to regulate FDIC-insured banks as well as the government-sponsored entities Fannie Mae and. This would require the largest bank bailout in US history. Far-left democrats tried to demand more regulation, and far-right Republicans tried to push for an end to the FDIC- both would have avoided the need for a federal bailout- but the moderates prevailed, and ultimately accommodated the biggest financial meltdown in 70 years.
Finally, Barack Obama was elected in 2008 and the Democrats gained a filibuster-proof majority in the Senate, with the promise of a drawdown in Iraq. Instead, a flurry of paternalist legislation was passed, including the Affordable Care Act, which required every person in the United States to buy health insurance or pay a penalty. Reeling from a bloated federal budget and deficits that dwarfed Democrats' complaints about Bush's deficits, a group of libertarian, conservative, and populist voters revolted against the liberal Washington elite.
House Republicans forced a number of spending cuts, prevented a number of spending increases, and helped limit more paternalist legislation from Washington. Everything seemed to be going well until members of the Tea Party in the House of Representatives felt that it was worth holding America's credit hostage to achieve their political objectives.
The problem is that a failure to raise the debt ceiling won't achieve the objectives that the Tea Party is aiming for. A failure to pay interest on treasury bonds will increase stress on banks. And undermining faith in the full faith and credit of the United States undermines faith in its T-Bills, which ultimately undermines faith in the US. Dollar- since the two are so fungible in an ultra-low-rates environment. If a federal default lasted long enough, and treasury bonds went unpaid long enough, ATMs could eventually stop working and the money in peoples' savings accounts may not be available to them. The FDIC may not be able to borrow the money for a bank bailout. If a default continued in the longer-term, the US currency could fall out of use, further reducing the value of peoples' savings, and ultimately, without a currency, it would be difficult to have libertarian capitalism.
There are ways to reduce government paternalism and end Obamacare, and then there are ways to increase the possibility of USSR-style Socialism in the US. If people can't get jobs or credit because the economy tanked, and can't even get their own money out of the ATM to simply buy food, are they going to stay laissez-faire Capitalists forever? Do we even want to threaten this sort of a situation?
Some members of the Tea Party are worried about the federal government's ability to repay its debt. If the federal government needs to default, it can always print more money. In fact, that's already priced into investors' inflation assumptions. Despite a near-doubling of the federal debt in five years, inflation has remained relatively stable and the inflation spread between TIPS and Treasuries has remained low. For whatever reason, despite concerns from Tea Party Libertarians five years ago- despite my own concerns five years ago- even two years ago, the nation's creditors haven't been all that worried that we may need to print more money than the currency market can absorb to pay off our debt. For the libertarians who have doubts about thecalculation, gold prices have dropped significantly from their highs and have never breached their 1980 inflation-adjusted highs. Maybe it's time for us to admit that Ben Bernanke and the Federal Reserve could have been right about our ability to service $20 Trillion in debt.
I have a different idea. Let's pass a clean increase in the debt ceiling and keep the debate going about the federal government shutdown. Let's allow savers to sleep at night even as we try to negotiate the federal government's spendthrift ways. The business of the federal government is always debatable- and should ultimately be subject to consensus between the House and Senate- let's just not leave any doubt about the debt.
If Obamacare fails, we can always repeal it. It wasn't too long ago that far-left Democrats and far-Right Republicans were trying to stop the invasion of Iraq. They said it was a terrible idea- that it would be a boondoggle. They eventually proved right, and we eventually got out of Iraq. It would have been nice to save some money in the meantime, but that was never possible. If we're confident that Obamacare is a terrible idea, we should try to repeal the bill. If we can't, there are rules that keep the country ahead of politics, and we can't ruin the currency to save the country from Obamacare. We just have to wait for voters to change their minds (they will) and give us the opportunity to repeal it.
We voted for staunch conservatives who would advocate liberty, vote for limited government, and play by the rules. So cut spending and find a way to repeal Obamacare without threatening the currency.
A Libertarian Voter
PS: Ted Cruz, apparently you graduated Summa Cum Laude from Princeton and got a JD from Harvard. So a smart guy like you might be as smart as us Midwestern state school folks about the economy and the currency. You should know better than to put your political career ahead of the country.