It’s unfortunate that people often embark on foolish actions without any warning from those around them. If only a sensible person could step in to redirect their misguided plans. Instead, these individuals tend to attract like-minded companions, engaging in reckless behavior together, much like a pack of hyenas cackling at their own folly.
Consider Philip A. Contos from Parish, NY. Last Sunday, he joined a group of friends for a protest ride without helmets. While he may have been pondering the ridiculousness of helmet regulations and enjoying the freedom of riding unencumbered, fate had other plans when his Harley Davidson motorcycle lost control, resulting in a fatal crash.
Authorities indicated that Contos likely could have survived had he been wearing a helmet. It’s tragic, really—he didn’t stand a chance in a seemingly senseless situation. Yet the unfortunate reality is that he and his friends didn’t exercise sound judgment.
Nevertheless, Contos’ demise serves as an important reminder: it’s futile to attempt to legislate away foolishness. This raises the question of why we have helmet laws at all. Unsurprisingly, this lesson might be too nuanced for our lawmakers to grasp. They’re probably busy crafting new regulations to prohibit helmetless protest rides against helmet laws.
At Economic Prism, we present this troubling story not for the sake of entertainment, but to emphasize a crucial distinction. There exist both senseless idiots and nonsensical idiots. Contos belonged to the former category. The focus of today’s letter is on the latter.
Unconstitutional Money
Never before have we witnessed such a surge of nonsensical idiots in the ranks of the U.S. Government. The current debt limit debate illustrates this more vividly than ever. Allow us to explain.
As Zachary A. Goldfarb noted in Wednesday’s Washington Post, “Law professors, Democratic senators, and liberal commentators have recently suggested a bold solution to end the congressional deadlock over raising the federal borrowing limit.”
“What if President Obama simply declared the debt ceiling unconstitutional and resolved the matter?”
Supporters of this idea reference the 14th Amendment, which states that “the validity of the public debt of the United States… shall not be questioned.”
Clearly, those advocating for this stance are demonstrating a lack of logic. They neglect to scrutinize the Constitution itself, which, based on our observations, has been disregarded for quite some time.
Take, for instance, Article I, Section 8, which designates Congress—not the Federal Reserve—as responsible for coining money. Furthermore, Article I, Section 10 insists that money be minted in gold and silver, not as worthless paper credit. If the Constitution is still upheld, then the unbacked currency known as Federal Reserve Notes is, in fact, unconstitutional. Yet this truth appears to elude our lawmakers.
Default Now
Regardless, the argument rooted in the 14th Amendment is fundamentally misguided. Do you believe that foreign investors in U.S. debt care if the Constitution insists that “the validity of the public debt of the United States… shall not be questioned?”
The reality is that raising the debt limit only heightens questions about the legitimacy of U.S. public debt and the government’s ability to repay it. The assurances provided by the 14th Amendment are irrelevant.
Furthermore, Congress has already undermined the country’s finances long ago. The first recorded debt limit was established in 1917, compelling Congress to approve each issuance of public debt prior to that point. The introduction of a debt limit merely authorized the Treasury Secretary to issue debt within the established boundaries without needing Congressional consent.
The debt ceiling has always functioned as a fragile barrier. Over the past 94 years, it has been adjusted 102 times, with the situation becoming particularly chaotic in the last three decades. In 1982, national debt first reached $1 trillion. Today, we teeter on the edge of a $14.3 trillion ceiling. In 1982, the debt-to-GDP ratio was approximately 31 percent; today, it hovers near 100 percent. In essence, the government has borrowed its way into a corner, leaving future generations to deal with the fallout.
Our leaders seem to complicate the solution, yet it is actually very simple: spend less than what you earn in tax revenue. Cease all borrowing. Use any budget surplus to reduce the debt.
Unfortunately, the U.S. government will never take this sensible path. In reality, the public debt will likely never be repaid in an honest manner. So why maintain the illusion?
It might be time to confront the inevitable. Default now. Bring the situation to a head. Doing so will spare future generations from the burden of repaying these debts. The lessons learned from these errors, as the mountain of debt crumbles, can pave the way for a future rooted in sound money and ethical banking practices.
Sincerely,
MN Gordon
for Economic Prism
