None of this is consistent with Obama’s desires. His interest is in eliminating the sequester and increasing spending beyond current levels. But at this point, a break is essential and even more essential than holding firm on the debt ceiling. At some point, the government must spend within its limits. It can continue to borrow in financial markets only as long as lenders are confident they will be repaid. The Fed’s decision to continue its program of quantitative easing—the creation of $85 billion per month out of thin air, which it uses to buy government bonds and mortgage-backed equities—is vastly expanding the pool of currency. With growing federal deficits, the markets will eventually believe that the pull of inflation is inevitable.
Lenders do not want to be repaid with inflated dollars. Governments are infamous for repaying lenders with inflated currency. Inflation is a tool used by functionally bankrupt governments to restructure their debt and impose a hidden tax increase on unsuspecting taxpayers. Our government may be planning to pay for its continued deficits from an inflation tax.
The alternative is an actual tax increase. In a weak recovery, that will take money from the private sector that it can’t afford to lose. It will replace efficient private spending with inefficient public spending, reducing growth and raising unemployment. Only 47 percent of adults in this country have a full-time job as it is. The fall in unemployment figures are due to people leaving the work force or finding part-time jobs. In this tepid economy, a tax hike is not a wise idea.
The budget must move back to balance. A continuing resolution that cuts spending and forces the budget baseline downward on the way to a true budget is a good way to get there. Refusal to raise the debt ceiling probably is not, and raising the debt ceiling while doing nothing to slow the growth of the budget will be the worst outcome of all.
Armstrong Williams is the author of the brand-new book “Reawakening Virtues.” You can find more content on RightSideWire.com. Come join the discussion live 4-5 p.m. EST at www.livestream.com/armstrongwilliams or tune in 4-5 p.m. EST on S.C. WGCV, Sirius/XM Power 110, 6-7 p.m.
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