Freedomain Radio - Stefan Molyneux - 1956 The Debt Ceiling Is Complete Bullshite!
Aired: 2011-07-18
Duration: 06:28


=== Debt Ceiling Hikes (05:59) ===

[00:00:00]  The debt limit is nonsense.
[00:00:02]  Politics is bad theater by Stefan Molyneux, host of Free Domain Radio.
[00:00:07]  So why is the debt ceiling nonsense?
[00:00:09]  Well, over the past 10 years, the debt ceiling has been raised 10 times, sometimes even more than once in a single year.
[00:00:16]  Here's the chart. As you can see, it goes lockstep.
[00:00:19]  It's been raised almost a hundred times over the past hundred years.
[00:00:23]  It's complete nonsense.
[00:00:25]  The black bars here represent the time lag between the need to raise the debt ceiling and actually raising the debt ceiling.
[00:00:32]  Sometimes it's been a couple of months and everything's been just fine for the government.
[00:00:37]  Oh, and by the way, August 2nd, 2011, a completely arbitrary date.
[00:00:40]  Timothy Geithner has changed this date at least four times so far.
[00:00:43]  In 2011, we're just over halfway through.
[00:00:46]  There's not going to be a default on the federal debt, at least not in 2011.
[00:00:51]  Let's look at the numbers. To avoid a default on your debt, it's the same for you with your visa as it is for the government with its debt.
[00:00:58]  If you pay the interest, you're fine and your creditors are fine.
[00:01:02]  So fiscal year 2011 federal tax is $2.2 trillion, entitlement spending $1.6 trillion, other spending $1.9 trillion, net interest was $225 billion.
[00:01:11]  And given that the fiscal year is close to its end, government needs maybe 50 or 60 billion to continue to pay the interest on its debt.
[00:01:17]  It could find that just looking under the couch.
[00:01:19]  So there's not going to be a default.
[00:01:21]  That's important to understand.
[00:01:22]  This is why the bond markets aren't panicking.
[00:01:26]  Why are tax increases off the table for the GOP? Well, the last time Republicans agreed to one of these We'll give you $2 in spending cuts for every dollar in tax hikes was 1990.
[00:01:37]  And here's the graph about what happened.
[00:01:39]  So the promised spending cuts were over $250 billion.
[00:01:43]  But in fact, there were spending hikes.
[00:01:45]  The spending cuts never materialized.
[00:01:47]  All the tax hikes, as you can imagine, did materialize.
[00:01:49]  None of the spending cuts did. And there were, in fact, spending hikes.
[00:01:52]  So when Democrats or the party not in power offer you spending cuts, do not believe them.
[00:01:58]  It is all kabuki nonsense.
[00:02:01]  What happened in 1990?
[00:02:02]  Well, he was promised $2 in spending cuts, the president, for every dollar in tax hikes.
[00:02:07]  All $137 billion in tax hikes went through.
[00:02:10]  Top marginal tax rates went from 28% to 31%, and a setup for the 93 Clinton tax hike of this rate all the way up to almost 40%.
[00:02:18]  Increases in sin taxes and the Medicare payroll tax and so on.
[00:02:23]  And the $274 billion in promised baseline spending cuts, they just never quite materialized.
[00:02:29]  Baseline spending was actually $22 billion higher than what was projected before the deal.
[00:02:34]  This was despite another tax hike and baseline spending cut deal in 1993 and the GOP takeover of Congress.
[00:02:40]  In 1995. See, it doesn't matter whether you oppose or don't oppose the raising of the debt ceiling.
[00:02:48]  If you're in power, you want the debt ceiling raised.
[00:02:50]  If you're out of power, you'll use it to try and get your way.
[00:02:53]  The cause is, well, it's pretty simple to figure out why the debt ceiling has been raised 10 times in the last 10 years, since 2001.
[00:03:02]  The national defense programs have risen, spending has risen 70.5%, non-defense discretionary, 56% almost, Medicare over 75%, Medicaid over 75%, Social Security almost 40%, and other spending has risen over 64%.
[00:03:17]  Well, these people are drunk.
[00:03:20]  You give them more money, all they're going to do, like addicted gamblers, is double down, baby.
[00:03:24]  They will never, ever take the money off the table.
[00:03:27]  See if you can recognize this quote.
[00:03:33]  Yes, Barack Obama in 2006 voting against...
[00:03:54]  Well, you guessed it, raising the debt ceiling, which he is now begging Congress to do.
[00:03:58]  It's inevitable. You can't even call this hypocrisy.
[00:04:00]  It's so inevitable. Over the last 10 years, federal spending has increased by over 60% in inflation-adjusted dollars.
[00:04:09]  Last year, for the first time since new budgeting procedures were put in place in 1974, the government failed to actually pass a budget, despite the president's party holding both houses of Congress.
[00:04:21]  Between January 2008 and May 2010, the private sector lost almost 8 million jobs over the same time frame.
[00:04:27]  Public sector employment actually increased by a net 590,000 jobs.
[00:04:32]  And these people are seriously overpaid and underworked, my brothers and sisters.
[00:04:36]  Can we raise taxes to cover this?
[00:04:38]  Of course not. That is a fool's, fool's quest.
[00:04:42]  You can tax all of the billionaires in the U.S. every single penny they had and owned.
[00:04:46]  You wouldn't even cover the federal deficit for one year of the federal spending.
[00:04:50]  So between 2002 and 2007, state governments increased revenues by about 81%, four times faster than price inflation and population growth.
[00:04:59]  So imagine, you get four times your take-home pay.
[00:05:02]  What are you going to do? You're going to spend.
[00:05:04]  But governments do it in a different way.
[00:05:09]  So, because of this massive increase in state government revenue, if they'd simply had kept pace with price inflation and population growth, they should have had $2 trillion in reserves by the time the recession hit in 2008.
[00:05:23]  States first started taxing income in the 1970s.
[00:05:26]  Massive, massive income for the states.
[00:05:28]  So have they been in financial trouble ever since?
[00:05:30]  Of course they have. 45 states have a combined $125 billion shortfall for fiscal year 2012.
[00:05:37]  So you have to call it a shortfall, not a deficit, because states can't run deficits.
[00:05:41]  But you see, you give them more money, all they do is use it as collateral to borrow more.
[00:05:45]  Raising taxes will not help.
[00:05:47]  The $14 trillion total federal debt doubles over the next decade, even under the best case scenario.
[00:05:54]  Which is not even remotely going to come true.
[00:05:56]  So giving more money to the government is only going to make things worse.

=== States' Financial Shortfall (00:29) ===

[00:05:59]  So I just wanted to point some of this stuff out.
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