Legally, our Congress has the power of the PURSE. This means that spending bills must originate with our Congress (not the Executive). Biden and his progressive friends (AOC, Sanders, Warren, et al) want Biden to ignore the current Debt Ceiling set by our Congress and continue the spending...using new DEBT as the funding tool when spending exceeds revenues. Today, our government is SPENDING some $1.6 trillion more than we receive in tax revenues. This deficit gets added to the current DEBT (now over $31 trillion). America has a spending problem and this must be changed is the view of the GOP.
Can BIDEN and his progressives IGNORE the current Debt Ceiling (set by Congress) and continue the deficit spending using new debt as the funding tool? Does the 14th Amendment give Biden this prerogative? Section 4 of our 14th Amendment says that U.S. DEBT shall not be questioned (meaning that our debt should be paid when total revenues exceed the debt service...interest on the debt). As I write, the interest on our debt is only some 13.5% (on average) of our tax collections (revenue). This means that our Treasure (Janet Yellen) should 'prioritize' this interest payment so our DEBT is not questioned by the markets.
As of today, our House has passed a new DEBT CEILING bill along with a spending budget for our nation. This bill is now being negotiated with the President and the Senate. Both our democratic senate (now having a majority) and our President (Biden) want to ignore this debt ceiling bill so that existing SPENDING can continue (now with a deficit of some $1.6 trillion as I write). See the numbers here: www.usdebtclock.org. The idea is that our 14th Amendment would allow this situation (to ignore Congress and the Debt Ceiling bill). Is this valid legally per our Constitution?
Personally, I agree with today's Wall Street Journal article (page A16) which says that Biden's interpretation of Section 4 , Amendment 14 is invalid. What our Treasury must do for actions to be lawful and constitutional is to 'prioritize' the interest on the existing debt so that there is NO DEFAULT. If this is not done, then Biden is taking the PURSE from Congress and changing our legal process as outlined in our Constitution. I don't think that Biden can legally pursue this OPTION. I appears UNCONSTITUTIONAL.
What needs to happen is that our interest on the DEBT must be paid (prioritized) and this would then mean that SPENDING (via deficits) must change. Biden and his progressives must REDUCE spending and live with the AGREEMENT which our GOP desires for the nation. Biden's idea of using the 14th Amendment to IGNORE the wishes of the HOUSE can not prevail IMO. Congress has the total control over the PURSE (spending) and Biden and Yellen MUST abide by the decisions of our Congress (as the HOUSE has proposed). This means our SENATE and BIDEN must negotiate in good will with McCarthy and the other GOP representatives in the HOUSE.
Yes, America must reduce spending to a degree and this means a RECESSION is coming for America. This recession will eventually lead to a DEPRESSION as the American DOLLAR is now a discredited reserve currency on the International markets. Some 30 countries have rejected the dollar for trade issues and this will eventually crash the 'value' of our dollar on the international markets. America is heading for a RECESSION in 2023 and then a much more serious DEPRESSION in 2024. The problem is the END of Keynesian economics and the beginning of living within our MEANS.
As I have mentioned in prior missives, the model for America has been the Keynesian MODEL. This model encourages the government to inject SPENDING whenever the economy slows down. Aggregate demand is key and government spending (via DEBT) is the tool under this Keynesian economic model. The problem is that this model started after the LAST great depression (1929-37) under FDR and it is now defunct as a viable model for today's international markets. Keynesianism is DEAD as debt has accumulated to unsustainable levels. See the numbers here: www.usdebtclock.org.
What we need today is a NEW MODEL for the planet. This can not occur UNTIL the existing model is totally REJECTED. My sense is that this Keynesian model will be rejected AFTER the coming economic depression (in 2024). The model started in 1934 and it was designed to last for some 90 years. Ninety years is 2024. This means that America MUST experience a RECESSION soon and then this recession will lead to a greater DEPRESSION. 1929 will repeat but it will be much more DIRE (the problems are much more dire today). We are at an END to the Keynesian economic model and everyone will be AWARE when the markets CRASH. Money rules over this planet and our stock markets rule over CONFIDENCE!
We are living with false 'confidence' as I write and I think this will change as the DEBT CEILING issue plays out. June 1 could be a CRUCIAL date as our TREASURY will run out of spending power (for all the existing programs) on this date (or soon after). Biden must recognize the problem and McCarthy must force the issue for the GOP. It's all happening fast and furious and the next two weeks should be historic on the issue of AMERICAN control over its debt. My view is that the END of Keynesianism is here. John Maynard Keynes died in 1946 (Easter Sunday). His model is now also dying for the WORLD.
Watch June 1 as the DAY OF INFAMY if the Debt issue is not settled prior to this DATE. Biden must CAVE is my view. McCarthy is unlikely to cave as his support within the HOUSE would then CAVE. We live with polarized politics and the current battle is between Biden and McCarthy. My scenario is based on the ASSUMPTION that McCarthy's House will prevail on this debt issue. If I am wrong, then all my assumptions on economics would also be wrong. I will LIVE with my current ASSUMPTIONS as being valid. Watch the markets for evidence!
The Keynesian model of economics started in 1934 - 1938 and has continued since with a few twists. It was adopted by America as valid when Nixon closed the Gold Window in 1971. In reality, this model was valid when FDR accepted the model for America after the last great depression. Aggregate demand was the mantra of John. Governments must spend to increase 'aggregate' demand. FDR bought into this mantra as have most politicians since.
Nixon closed the gold window in 1971 and simultaneously proclaimed that the Keynesian model was now the policy of America. Milton Friedman, economist, agreed that this event happened after August 15, 1971. The model called Keynesianism was adopted by America as official policy in 1971. Today, this model has led to our unsustainable debts and deficits.
The idea that our government could keep the economy from crashing was the policy of Keynesianism. Governments should massively increase its own SPENDING was the idea! This policy has led to our current dire problem of unsustainable debt and deficits.
Deficits add to our National Debt. There is no current solution!
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