Government Shutdown?

Here we go again. The political party out of power threatens to block debt ceiling adjustment, thus cutting off cash for government operations. This is a gambit to gain power by threatening to shutdown government operations. This is a bullying tactic. It is a favorite ploy by the republican party.

It almost always fails. Sometimes the shutdowns occur. They mostly damage the body politic with economic volatility. Longer lasting effects are not gained, especially the rewards the gambit promises.

Over the long run, threatening government shutdowns have mostly harmed members of congress. Both republicans and democrats lose face. The parties are damaged. Leadership fails. And that is never a good thing.

The debt ceiling itself is artificial. So are the economics arguing lower debt.

The relationship of debt to the larger scale of the economy is the rightful focal point. The debt ceiling is just a number without relationship with anything else. To have meaning, we must measure debt in relation to our ability to repay the debt. And the price of the debt.

Interest rates are currently very low. The cost of the debt is thus low. Now is a good time to borrow, not repay. Also, the ability to repay debt is high. New industries are being created and earning high profits. Even old industries continue profitably. Net income upon which taxes are paid are doing quite well. Other use taxes continue to prosper. Thus, government has the means to repay the debt on time and in accordance with the debt instrument’s provisions.

Managing the economy comes in many forms. It is not regulated mainly by debt. Nor interest rates. Not unemployment rates, mortgage rates, or the price of gas at the pump. The economy is large and complex. The principles of managing a national economy are not the same as individual states, counties or municipalities. Nor are national economic policies the same as in private households. Economics 101 and 102 teach these things. they are basic.

Too bad so called leaders do not know or understand the basics of our economic system. And congress?  Good Lord but they are ignorant. Not powerless. No, the ignorant always have power in their ignorance.

More’s the pity in that for the rest of us!

December 9, 2021

 

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