Is Donald Trump the New Economic Scapegoat?
by Jacob G. Hornberger
A presidential candidate finally addressed the out-of-control federal spending and debt that has brought — and continues to bring — a mountain of debt to the federal government. That would be Donald Trump, who suggested that the solution to the mounting debt crisis is partial default. That is, paying owners of U.S. bonds less than the amount promised them under the bond contract.
That would make lots of American taxpayers happy because then they would be saddled with a lower tax load. Taxes, after all, are the only way to pay off the federal government’s debt.
That would also make welfare-statists and warfare-statists happy because then they could just increase federal spending for their projects even more.
But it obviously wouldn’t make creditors very happy. They loaned their money to the government with the expectation that the government would honor its word and pay them back in full plus interest.
Trump’s proposal is already receiving condemnation by his critics, and rightly so. When the government borrows the money, it signs a contract for repayment. Contracts should be honored.
Contracts are different from welfare programs, such as Social Security, Medicare, Medicaid, farm subsidies, and food stamps. That’s because the laws that establish welfare programs are not contracts or promises to pay. Oh sure, welfare recipients convince themselves that promises to pay have been made, and politicians and the mainstream press might even tell them that welfare program establishes a promise to pay. But all that matters is what the law says. The laws that establish welfare programs do not contain promises and they are not contracts. In fact, all welfare programs, including Social Security, Medicare, and Medicaid, could be repealed today and there would be no legal liability on the part of the government.
Some commentators are already suggesting that if an economic crisis were to occur, it would be Trump’s fault for bringing up the possibility of default. Call it the Big Setup. The idea is to find a scapegoat—any scapegoat for the oncoming economic and monetary crisis. Until Trump came along, Russia and China were to serve that role. When the crisis hit, you would inevitably hear something like, “When China gets a cold, America catches pneumonia “ or some other bromidic nonsense. Now they can blame it on Trump and his default proposal or his nonsensical economic proposals, including calling for a trade war against China.
But make no mistake about it: When the crisis comes — and it is coming — there will be one and only one reason for it: The out-of-control federal spending that comes with the welfare-warfare state way of life.
Consider the debt ceiling debate that comes up every three or four years. The debt ceiling is the maximum amount of debt that the federal government is permitted to incur. It is enacted into law by Congress.
Why is there a debt ceiling? Because Congress has determined that too much government debt is a bad thing — a dangerous thing. Consider, for example, Greece and Puerto Rico. Government spending and borrowing in those two places soared out of control too. The mountain of debt ultimately got so high that the government was unable to pay the debt, its welfare expenses, and its regular expenses. High taxes would only make the situation worse by driving firms into bankruptcy, thereby reducing the number of taxpayers to fleece. Greece had to get bailed out by the EU. Today, Puerto Rico is defaulting on its debt instruments and begging Congress for a bailout or permission to default through bankruptcy.
Who will bail out the U.S. government when its mountain of debt gets so high that it can’t pay its Social Security, Medicare, Medicaid, food stamps, and other welfare recipients, its military expenditures for its vast overseas warfare-state killing machine, its massive ever-growing debt, and its regular expenses of operations?
Answer: No one, except the U.S. taxpayer, who will be hit with massive, shocking taxes, perhaps even confiscation of retirement accounts and gold coins (again), and a constantly devaluing currency, thanks to the Federal Reserve.
Notice that each time the debt ceiling is reached, it’s raised again, which thereby permits the federal government to continue with its out-of-control spending spree and its ever-increasing mountain of debt. Notice that since the last time the debt ceiling was reached, federal expenditures have not been slashed in anticipation that the new debt ceiling is approaching. That’s because they plan to raise the ceiling again when it is reached the next time.
Meanwhile, the statists issue such idiotic bromides as, “It doesn’t really matter anyway because we owe it to ourselves.” Well, “we” don’t it owe it ourselves. The federal government owes the money to bondholders, who have a legal right to be paid what they are owed. The federal government gets the money to pay those bondholders by taxing the American people. The more debt, the higher the taxes.
One other point: Those who are criticizing Trump’s plan for default are the epitome of hypocrisy. The fact is that the federal government has been defaulting on its debts for decades, with nary a peep of protest from Trump’s critics. That’s what the Federal Reserve is all about — printing the money to pay off the debt in cheapened, debased dollars. Creditors end up getting less that what was promised to them and the American people end up with a constantly devaluing currency that is manifested by ever-increasing prices of things they buy. That’s why there are no more silver coins in circulation and why it’s only the cheap alloyed coins that are. The Fed has debased the currency so much that people would be stupid to use silver dimes in vending machines rather than cheap alloyed coins. At least Trump’s default plan is more direct and forthright as compared to the surreptitious, fraudulent default scheme based on the Fed’s policy of inflation.
I’ve said it before but it bears repeating: All this out-of-control federal spending and debt cannot and will not end well. As one economics commentator put it, the 2008 economic crisis wasn’t an earthquake. It was the tremor before the earthquake. And mark my words: When it comes — and it is coming — it will inevitably be blamed on the Russians, Chinese, Donald Trump, illegal aliens, America’s “capitalist” system, or some other scapegoat de jour.