"We're on an unsustainable trajectory with the $13.6 trillion national debt. If something is not done, a temporary default will be the least of our problems."—ALG President Bill Wilson
November 8th, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today praised Senate Minority Leader Mitch McConnell "for not accepting perpetual increases in the national debt, and instead fighting for a serious reduction in spending and debt."
Wilson referred to McConnell's interview last week with FOX News' Brett Baier, where he spoke on increasing the national debt limit, "I think it will not be without some strings attached, if it happens, because they're going to have to seriously address spending and debt."
Wilson said that means "attaching serious spending cuts to an increase in the national debt." Periodically, Congress acts to increase the national debt, thus authorizing the Treasury to borrow more money in order to pay off the principal owed on the debt.
"We're paying the credit card bill with the credit card, and so every year the debt goes up. It's gone up every year since 1958 as a result," Wilson said.
Wilson said that "besides the budget itself, the debt limit is one of the few leverage points that House Republicans in particular will have. In the next three years, if spending is not cut, the Treasury will have to sell a record $8.8 trillion of U.S. debt. We've never sold that much. It's the real reason the Fed has once again fired up the printing press with $600 billion of fresh bond purchases."
Wilson added, "If spending is not cut, don't be surprised if they have to come back next year with QE3, and QE4 the year after that."
Wilson encouraged congressional Republicans "not to be bashful about attaching cuts to the debt limit increase," pointing to a recent oped by Senator Tom Coburn (R-OK) in the Washington Examiner, where he wrote, "If Republicans vote to raise the debt without insisting on spending cuts, whatever credibility we may have will be gone."
Wilson praised Coburn, saying, "Coburn is exactly right. Whereas Democrats have lost the House because they fulfilled their principles and implemented their statist agenda, Republicans lost it in 2006 for abandoning their principles and running up the national credit card."
Wilson said that Barack Obama's primary political strategy in the legislative branch would be "to get Republicans to quickly abandon their pledges to pay down the debt, end bailouts once and for all, repeal ObamaCare, make tax relief permanent and create jobs, and eliminate Fannie and Freddie."
"The more Republicans compromise their principles, the weaker their political support will become with the tea party movement and other citizen activists who propelled them back into the majority," Wilson explained. "Obama's goal is to break up surging citizen support for reducing government."
Wilson said that the debt limit should be used as leverage to enact sharp spending cuts, even if Obama threatens to veto the resultant legislation. "Republicans are going to increase the debt limit, although the need to do so would be mitigated if the budget were actually balanced. If Obama wants to veto a debt limit increase, even if it is tied to spending cuts, he'll be the one who is causing the government to default."
"The reason the government would default is because we're broke," Wilson said, adding, "We cannot meet our obligations without borrowing more money, thus creating new obligations. We're on an unsustainable trajectory with the $13.6 trillion national debt. If something is not done, a temporary default will be the least of our problems."
"By this time next year, the Federal Reserve will be the number one holder of U.S. debt, a sure signal that we're printing money to pay our bills. In the next few years, the debt will soar past 100 percent of the Gross Domestic Product. By 2018, if not sooner, our Triple-A credit rating will be downgraded. All of these things will mean higher costs to paying the debt in the future, and a weaker dollar. In the end, the dollar will lose its special status as the world's reserve currency," Wilson concluded.