BY HEM RAJ JAIN | OCTOBER 16, 2013
US Congress should not raise the debt ceiling
The current US government shutdown is more or less an internal matter but debt default, being an international matter, will no doubt destroy the USA in every sense and not merely economically or with regard to its credibility. The media has highlighted this statement of US Treasury Secretary Jack Lew: “Budget brinkmanship was playing with fire and implored Congress to pass legislation before October, 17 to increase the nation’s $16.7 Trillion debt limit in order to avoid a debt default by US Government.”
This is nothing short of misleading the USA and the world and black-mailing the Congress.
Public debt through fiscal deficit is supposed to be incurred for removing unemployment in democratic welfare states (even as per prescriptions of eminent economist and proponent of fiscal deficit, John Maynard Keynes). Hence any public debt is supposed to be spent by governments in a way which increases employment hence increases demand which in turn increases GDP. This extra pumped money is to be taken back as the USA is also planning to taper off the quantitative easing (QE) from year end or by other measures.
In a nut shell, public debt has to be linked to consolidated funds (revenue and other income) of any Federal / Central Government which is mostly 10 – 15 percent of GDP of any country. But under the pressure of usurers and due to the propensity of politicians to squander public money, most of the governments world over increased it hugely. The EU kept this limit to 60 percent. In reality, in many countries (of EU too) it is over 200 percent of GDP; in the USA it is over 100 percent of GDP, because there is no commensurate asset back-up (precious metal or otherwise) of currency, the High Power Money M0.
This huge public debt has created a situation where major portions of consolidated funds of governments are spent in servicing the debt with the result governments are unable to spend money on employment generation programs; hence there is huge unemployment all over the world which has resulted in ‘Generation Wasted’ as per one European leader.
Even in India despite Articles 292 & 293 of Constitution (and by enacting unconstitutional law FRBM), governments have been indulging in this open loot through constitutionally and morally untenable public debt where Chief Ministers (including Mamta Banerjee of West Bengal) were seen frequenting India’s capital Delhi to get some money as these states are hardly left with any money (after servicing public debt) to carry out legitimate government functions. Obviously other countries are following the monetary model being followed by the West (USA and Europe) where politicians and usurers world over are having a field day amidst ‘Wasted Generation’ and therefore the US Congress instead of increasing the debt ceiling should insist and pass a law which will discipline the US government monetarily and will constrain it to tighten its belt. There are so many areas where its unnecessary and wasteful expenditure can be reduced. One area is defense spending.
The USA is spending an astronomical and out of proportion $650 Billion on defense which is 40 percent of global military spending (though its GDP is only 22 percent of global GDP). Most of it is used by the US government by giving the lame excuse the USA has to ensure global peace through its military, which is absurd and far from truth. Other countries are prepared to share the burden of maintaining global peace by contributing [men (including martial), material (including armaments) and money] to the UN. But the USA wants to retain hegemony and monopoly of five permanent members through veto to P-5 countries and does not want voting rights in the UN Security Council to all members as per the formula based on said contribution to the UN.
The entire world has seen the USA do practically nothing (its act of omission) to solve the gory fall-out of Arab Spring (including in Syria without any respite so far) where hundreds of thousands have been killed and millions have been displaced. Even when the USA intervened (its act of commission) in Afghanistan and Iraq, the remedy has turned out to be worst than the disease. The USA needs to understand world peace can be best maintained by the participation of every country of the world.
Therefore both Democrats and Republicans should immediately start educating the people not only in the USA but all over the world that Congress is not raising the debt ceiling because it is interested in keeping public debt under control and even in bringing it down to a reasonable and morally tenable level. Moreover Congressmen should say if there is going to be any debt default it will be due to a failure of the current administration to cut the wasteful and unnecessary expenditures of the US government and not due to non-increase of debt limit by Congress beyond $16.7 Trillion.
Hem Raj Jain is the author of “Betrayal of Americanism.” He currently resides in Bengaluru, India.