Eli Dourado

ET and the debt ceiling, a Socratic dialogue

ET: Greetings, Earthling! I am a visitor from another star system, searching the galaxy for intelligent life. May I ask you a some questions about your planet?

Earthling: Of course, I am happy to be of assistance.

ET: Excellent. Will you tell me, Earthling, what is this debt ceiling that everybody is discussing?

Earthling: The debt ceiling is the maximum amount that the government is authorized to borrow.

ET: What is a government? I am not sure we have those in my star system.

Earthling: A government is the organization that controls a particular territory.

ET: Ah, we do have those in my star system. We call them “gangs.”

Earthling: Well, we have gangs too, but governments are different. They provide public goods that are paid for through taxes.

ET: What are taxes?

Earthling: Payments to the government.

ET: I see, so people make voluntary contributions to the government and they get public goods in return. This makes sense now.

Earthling: Well, no. Taxes are not exactly voluntary.

ET: What do you mean?

Earthling: If the government assesses someone with a tax, and he resists paying it, the government will send him to jail.

ET: And what if he will not go?

Earthling: The government is very powerful; it will seize the tax resister and punish him by whatever means necessary.

ET: I see. So the government uses the threat of violence to take money from people who do not wish to pay. This sounds a lot like the gangs that exist in my star system, but I will accept your word that there is some nuance that as a visitor to your planet escapes me. But Earthling, this debt ceiling matter still puzzles me. I fail to see why it matters how much the government is authorized to borrow. If a human manages to retain any resources after the government has taxed him, why would he turn around and give those resources to the government? The government would just keep it. So whatever the government is authorized to borrow, there will be no borrowing.

Earthling: The lenders expect to be paid back.

ET: In my star system, someone who lent to a gang would not expect to be paid back.

Earthling: Here they expect to be paid back with interest.

ET: Oh, now I get it. People lend to the gang—excuse me—I mean, government as a risky, high-reward strategy. Interest rates on money lent to the government must be very high. Tell me, am I right?

Earthling: No, on the contrary, they are very low.

ET: Impossible.

Earthling: It is true.

ET: I am truly puzzled, but perhaps if I ask more questions it will make sense to me. Tell me Earthling, why does the debt ceiling need to be raised? Is it very low?

Earthling: It is $14.294 trillion.

ET: Can you put that number in context?

Earthling: That is for an economy that produces $15.018 trillion per year.

ET: So your government wishes to borrow more than 95 percent of annual output. Now it is beginning to become clear. Your planet must be undergoing a dire calamity. Tremendous resources are necessary to cope with it, more than can be raised through violence alone. Tell me, what is the calamity that your planet is undergoing?

Earthling: Well, there is an economic recession, but it is not exactly a dire calamity. The real dire calamity will occur if the debt ceiling is not raised.

ET: I do not understand. If there is no dire calamity, why must the debt ceiling be raised?

Earthling: If the government cannot borrow money, it will not have enough to pay for all the programs in its budget and to pay the interest on its previous loans.

ET: I see. In that case, those who run the government must be wise and universally respected humans. People trust them to make good decisions about how to spend the money. Is this so?

Earthling: Not exactly. Everyone agrees that those who run the government are idiots.

ET: What process is there for determining who runs the government? Is it through violence?

Earthling: No, the voters decide.

ET: Who are the voters?

Earthling: Nearly everyone is a voter.

ET: The voters must be idiots themselves if they select idiots to run the government.

Earthling: Uhhh…

ET: No matter. Tell me, if the debt ceiling is increased, on what public goods will the government spend the proceeds?

Earthling: Well, the spending will not be on public goods.

ET: But you said earlier that the government spends money on public goods.

Earthling: That may have been a slip-up on my part.

ET: In that case, how will the money be spent?

Earthling: The government is fighting three wars.

ET: Ah, I should have understood this earlier. The government is using the money to open up new revenue streams. It will conquer new territory and then increase its tax receipts.

Earthling: No, they are not those kind of wars.

ET: What kind of wars are they?

Earthling: Humanitarian ones.

ET: How can a war be humanitarian?

Earthling: We are imposing our form of government on other territories.

ET: You mean, the form of government in which idiotic voters elect idiotic humans to borrow money to fight wars so that other idiotic voters can do the same?

Earthling: Yes.

ET: Is that everything on which the money will be spent?

Earthling: No.

ET: On what else?

Earthling: Also on the elderly.

ET: What do you mean?

Earthling: The government transfers large sums of money to old people.

ET: To what end?

Earthling: To pay their living expenses and for their medical care.

ET: It must be very important to keep the elderly alive if the government is willing to borrow so much money to pay for their expenses. They must be very productive members of your society.

Earthling: Well, not exactly. Most of them are retired.

ET: What does retired mean?

Earthling: It means they don’t work.

ET: They don’t produce anything?

Earthling: Correct. But that’s not the point. We value the elderly in our society for their own sake.

ET: I see. So it is common for young people on your planet to frequently communicate with the elderly, and to volunteer to spend time with them, because they are so highly valued.

Earthling: No, young people do not generally like to do that.

ET: Tell me, what would happen if the government did not make these payments to the elderly?

Earthling: Many of them would be poor, and without medical care many of them would die earlier.

ET: It must be the case that becoming old is unforeseeable, then. People do not save enough for old age because they do not expect to live long enough to become old.

Earthling: No, most people expect to become old.

ET: And the medical care must give them several additional years of high-quality life, no?

Earthling: It extends their life somewhat, but much of the budget is spent in the last year of life, in which the recipient suffers quite a bit.

ET: So the spending is on unproductive people who face a foreseeable condition and who are given a short, temporary, and miserable reprieve on death?

Earthling: I suppose, but you must understand, the elderly constitute a high percentage of the voters. They have a lot of power.

ET: So in addition to those who want to spread your dysfunctional system of government around the planet through wars, the elderly are also to blame for your debt ceiling troubles.

Earthling: That’s right.

ET: You said earlier that it would be a dire calamity if the government did not raise the debt ceiling. How so?

Earthling: If the government cannot pay the interest due on its debts, its bonds will plummet in value. As a result, all of the financial institutions that hold government bonds will lose a large fraction of the assets that guarantee their liabilities. They will go bankrupt, the market for credit will disappear, and there will be a severe depression.

ET: That does sound bad. Why is anyone opposed to raising the debt ceiling, then?

Earthling: Some people are trying to use their refusal to raise the debt ceiling as leverage to get other political concessions.

ET: In my star system, we call this “the holdout problem.”

Earthling: Here it’s “checks and balances.”

ET: What are these holdouts trying to get?

Earthling: They want to cut government spending.

ET: I see. So they want to end all of the wars and spending on the elderly that have caused the debt to rise so high.

Earthling: No, they want to cut a small bit of the spending on the elderly and keep the wars.

ET: How much do they want to cut?

Earthling: Well, there are multiple proposals. Harry Reid has one. John Boehner has another.

ET: John Boehner. Is he the orange human?

Earthling: Correct. In all of the plans that have been proposed so far, spending over the next 10 years will be higher on average than it was last year, in which we had record deficits.

ET: I see. So these plans do not actually cut spending.

Earthling: That’s right.

ET: What will happen if the debt ceiling is increased?

Earthling: The crisis will go away.

ET: Bonds will not plummet in value?

Earthling: Well, there is concern that if the government does not balance its budget over the long run, its debt will be downgraded, its bonds will plummet in value, and there will be a severe recession anyway.

ET: But with the debt ceiling issue off the table, those who run the government will certainly pay more attention to the long-run balance of the budget, will they not? And thereby avoid the crisis?

Earthling: Hmmm.

ET: I mean, these long-run budget issues must have become known only recently if they are now, all of a sudden, a problem.

Earthling: The government has known about its long-run budget problems for many years and it has done nothing.

ET: And it has done nothing about them?

Earthling: Correct.

ET: I see. But the future will be different. It will do something about the problems after the debt ceiling has increased.

Earthling: Maybe.

ET: Well, thank you for answering my questions. I regret that I did not find what I was looking for on Earth, but perhaps after a few million more years of evolution, I shall return.