Two days after President Obama gave his State of the Union speech on Janaury 24th, Congress and White House begin their second round of debt ceiling battles within a year's time. In a microcosm of belief on the necessity of raising or halting the nation's ability to borrow money, two different schools of thought in Washington have emerged on the issue, pitting Obama vs. Ron Paul on opposite sides of the debate.
"The greatest blow to confidence in our economy last year didn’t come from events beyond our control. It came from a debate in Washington over whether the United States would pay its bills or not," Obama said in reference to those battles. – First Read, MSNBC
President Obama in his State of the Union speech used the strawman argument of the debt ceiling battle back in 2011 as being the catalyst which led to a lack of confidence in the economy, and the reasons for a lower GDP. In reality, the question should be about the debt and borrowing itself, and not about an unmeasurable 'confidence' in the markets which themselves have lagged for well over four years since the 2008 credit crisis.
Opposing the President's view, and need to raise the debt ceiling, is old-guard stalwart Ron Paul, who spoke last week on the House floor regarding the need once again to halt the borrowing, and force the government into fiscal responsibility.
Ron Paul: It’s also a creature of a mantle’s status here in the Congress of overspending... on just everything. And it would be nice if we could blame everything on the current administration, or even the previous administration, but the crisis we are in has been building over a long period of time, and it’s very bi-partisan. – Paul.House.Gov
Immediately you can see the difference between the two opinions on the debt ceiling issue. One focusses on the confidence, or lack of, created due to the battle between Congress and the White House, and another focusses on the core issue itself, that being the systemic destruction caused over the course of several administrations in the economy through massive borrowing and debt.
It is also a point of view on how each man seeks to deal with the root problem. In the case of President Obama, he seeks to blame Congress when in fact, it is his administration that is asking for $1.2 trillion in new debt for the Budget. Meanwhile, Congressman Paul blames his own legislative body, which has the power to vote yea or nay on the issue, for enabling administrations to keep enlarging our National Debt.
At the crux of the argument is an economic battle of philosophies, Keynsian vs. Austrian, and if debt is the catalyst for growth and production, or instead, if sound money and fiscal responsibility are the foundations. Before the 1950's when America survived on a near balanced budget outside the Great Depression and war years, production and growth led the way around the world, but at a more stable rate. However, beginning in the 1960's, the use of debt and government borrowing helped create a much faster and much bigger boom, but one based on bubbles than inexorably burst over time, and have led to greater and deeper economic crises.
Obama vs. Ron Paul over the raising of the debt ceiling is a personification of Keynsianiam vs. Austrianism in economic philosophy, and whichever wins out in this month's vote in Congress to raise or halt government borrowing, the American people will be the big losers, because the consequences of both at this point in the game, will mean a harsh depression for one choice, and potential hyperinflation and default with another.
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