We have a temporary truce in the debt ceiling fight. On Thursday, President Biden signed a bill increasing the federal debt limit by $480 billion.
But this isn’t an end to the debt ceiling fight. Congress just kicked the can down the road. The increase is only expected to keep the US government solvent until Dec. 3.
As Peter Schiff explained in this clip from his podcast, the debt ceiling has turned into a debt floor.
Janet Yellen has already announced the Treasury will continue “extraordinary measures” to prevent the accrual of debt. In a letter to Congress, Yellen called the small increase a “temporary reprieve” to a potential default.
“It is imperative that Congress act to increase or suspend the debt limit in a way that provides longer-term certainty that the government will satisfy all its obligations. I respectfully urge Congress to act to protect the full faith and credit of the United States.”
Joe Biden has said failure to permanently and substantively raise the debt ceiling will cause an economic catastrophe. Peter Schiff said Biden has it backward.
“The reality is it’s not an economic catastrophe if we don’t raise the debt ceiling. It’s an economic catastrophe if we keep raising the debt ceiling.”
Between 1962 and 2011, lawmakers jacked up the debt “limit” 74 times, according to the Congressional Research Service. This is why the national debt is well north of $28 trillion.
“If congresses in the past had had the guts to not raise the debt ceiling, we wouldn’t be in this predicament because we would have balanced the books a long time ago and we wouldn’t have all this debt.”
Politicians often claim we have to keep upping the borrowing limit because “America always pays its bills.”
“The reality is the reason we have to keep raising the debt ceiling is because we never pay our bills. If we actually paid our bills, we wouldn’t have any debt. It’s because we don’t pay our bills that we have all this debt and because we want to continue to not pay our bills, that’s why we want to raise the debt ceiling instead of paying our bills.”
If you pay off your Visa with your Mastercard, you haven’t really paid your bill. You’ve just transferred debt from one lender to another.
“So, when Americans borrow money and repay it by borrowing more money from a new lender, nothing has ever been paid. It’s one giant Ponzi scheme, and we want to continue this debt pyramid and have it grow and grow and grow, and that’s why we want to raise the debt ceiling.”
The fact is if Congress doesn’t raise the debt ceiling, it will speed up the catastrophe.
“What Biden really means is that if we raise the debt ceiling, we can kick the catastrophe down the road and we won’t have to deal with it today. But of course, it will be a bigger catastrophe because we’re going to have even more debt. So, by raising the debt ceiling now, we can avoid having to deal with the problem now. We can just make it bigger and have an even bigger problem to deal with tomorrow.”
But you can only kick the can down the road so far. If you could kick the can down the road forever, there would never be any debt crises. But there are. Countries go through them.
“History is replete with examples where highly indebted countries eventually ran out of rope. And just because America has more rope than maybe any other country by virtue of our status and the reserve currency status of the dollar doesn’t mean it’s an endless supply. At some point, we will reach the end of our rope and then we’re going to be dangling from it just like everybody else.”
Of course, Joe Biden doesn’t want to face the music while he’s in the White House. He needs the debt ceiling raised so the US isn’t forced to start paying its debts — which it can’t do. It would have to begin to default. About that, Yellen is right. And the US government would also have to substantially cut spending.
“So, what Biden wants, and what everybody in government wants, is to continue business as usual — continue to pass the buck, and go deeper and deeper into debt so we can buy stuff we can’t afford and borrow money we can never repay, all to keep a crisis at bay because we’d rather have it happen on somebody else’s watch.”