Why Rand Paul Is Wrong On Government DefaultSubmitted by Marc Clair on Wed, 01/23/2013 - 12:20
According to his website, conveniently named RandPaul2016.com (and yes, I know that the “2016″ is theoretically referencing his future Senate reelection bid in 2016 but….come on), Senator Rand Paul yesterday introduced the Default Prevention Act as a response to the latest iteration of the “debt ceiling debate”. Of course we’ve seen this show before, and we know how it ends: with the debt ceiling being raised after some sort of “compromise” is reached, where both sides cross-their-hearts-and-hope-to-die promise to fix the budget problems the country is facing next time.
Since the U.S. government technically reached the current legal debt limit on December 31, 2012, the government must rely on the funds it has and the funds it takes in to pay the bills. Those bills include everything and anything the government spends money on, from funding the overseas military empire to Social Security payments and of course, the interest on the debt itself. According to the press release from Senator Paul’s office:
In order to remove any chance of government default, Sen. Paul’s legislation spells out which government-funded programs should be held at the highest priority to continue funding, while paying down the interest and principal on debt held by the public.
“Some of my Republican colleagues in the House have decided to surrender to the Democrats’ annual plan to increase the debt ceiling. I believe we should stand and fight for a Balanced Budget Amendment to the Constitution before we raise the debt ceiling. My legislation takes the possibility of default off the table so we can continue to push for fiscal restraint. There is no reason the government would – or should – responsibly consider the idea of default,” Sen. Paul said.
Senator Paul has the wrong idea here when it comes to the national debt. He buys into the idea that the debt of the U.S. government belongs to the “public” i.e. every single person in the United States. This falsely equates private debt – where a person willingly takes on a debt and signs a contract to pay it back in a set amount of time with an agreed upon interest rate – with public debt. Conversely, the debts of the United States government are not contractually agreed to by anyone, and will not be paid through honest means. Instead, they will be paid through continued coercive taxation of the public.