Keeping the Debt Ceiling

July 20, 2011

Dear Speaker Boehner:

The House is responsible under our Constitution for proposing how our taxes are to be spent. A debt ceiling means that you have determined that the government will not spend more than it takes in once the ceiling is reached. Of course if more than that is authorized to be spent, the president can currently determine what to pay first, effectively taking Congress' power to determine how our money is spent. I think it is imperative that Congress (not the president) lay down guidelines for where money is to be spent first in case the ceiling is reached. I suggest you propose and pass a bill that lays down a payment priority order. Having such an order would eliminate the possibility of making unjustified threats and calm the people as it would allow planning. Here is an order I would suggest:-

1) Military salaries.
2) Social security and military pensions.
3) Defensive military operations and embassy operations.
4) Border security.
5) Cash distribution to support cash withdrawals upto $1000/day/account at banks.
6) Federal law enforcement (including judiciary) for internal security, and constitutional issues.
7) Debt payments.
8) Other obligations of the government not listed here.
9) Automated clearing house operations. Banks can continue to manually clear at their discretion.
10) Payments to the states.
11) Federal law enforcement for criminal activities.
12) Federal law enforcement for civil suits.
13) Congressional and presidential salaries. These would be permanently forfeited for any month the debt ceiling actively limited spending, as is currently done in California when the budget is not passed on time.

If you ever actually hit the ceiling, you may also tax every individual and corporation upto 1% of their controlled assets once per year to give the government some breathing room. Given the $54T estimated net worth of US households in 2009, this would provide upto $540B/year. If you use controlled assets instead of net worth, it could be much higher and may allow the income tax to be eventually eliminated.

If you argue that this would cause a rush to cash and devalue assets, that is a deliberate feature. Most people do not have the werewithal to save using assets and save cash instead - inflation is a silent thief that robs them of their savings.