The advent of a government shutdown is upon us as we reach our ever insufficient debt limit. Once again the extreme factions of the Republican Party are holding the country to ransom. Government workers are having sleepless nights, wondering whether they will get their paycheck this month. Parents are terrified that government schools may be shut down and their children’s educations compromised. Elderly people are worried that they might not get their social security or government pension. Is all this pain really necessary?
The concept of a debt ceiling comes from an era that never foresaw the need for borrowing in the amounts that our government requires today. The whole concept of a debt ceiling assumes that debt is somehow an inherently bad thing. The reality is that debt is a natural part of any healthy economy. Banks finance businesses large and small everyday with debt. Businesses invest the money they raise in revenue generating projects and use revenue to pay the interest on their loans. But businesses have no concept of a “debt limit”. They borrow what they need when they need it. If businesses don’t have debt limits, why should our government have one? Governments need financing just like businesses. Businesses need to invest in operations and new ventures and our government needs to invest in the economy and services that keep the country running smoothly. And for those who think our government has borrowed too much, I would like to point out that bond rates are at record lows!
So, people ask, why can’t the government run on tax revenue alone? For the same reason businesses can’t run on revenue alone; our government needs to provide essential services and invest in the economy now. Schools, hospitals, pensions and social security can’t just stay on hold while we wait for tax revenue to grow. The only way tax revenue will grow is if we invest ahead of the curve by spending money on infrastructure and other fiscal stimulus projects. This is why I firmly believe that the debt limit is a danger to our economy and should be eliminated. Some may think this is a controversial view, but the truth is it is founded on nothing but common sense and basic economic principles.