By Bill Wilson
“A contract lawfully made cannot lawfully be broken.”—Thomas Hobbes.
Last week, Moody’s issued yet another warning that the U.S. was “significantly” closer to having its credit downgraded. In short, if interest owed on the national debt, currently at an annual 8.49 percent of revenue at $188 billion, rises above 14 percent, the U.S. will lose its Triple-A credit rating.
As ALG News reported last week, by the White House’s own estimates, the U.S. will hit that dreaded market-imposed limit on sovereign debt some time in 2014. In that year, under Barack Obama’s ten-year budget — which includes the unsustainable costs of ObamaCare — annual interest owed at $510 billion will represent 14.76 percent of revenue.
At that point, there will be nothing to prevent the nation’s credit from being downgraded — with interest rates skyrocketing and the dollar losing its status as the world’s reserve currency. By then, it will be too late.
In order to avert flying off this precipice, as reported by Bloomberg, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London has stated that the U.S. may need to rewrite its “social contract” between the government and the American people.
But, in truth, the nation’s social contract was rewritten decades ago. It was rewritten with the ratification of the income tax; when the Federal Reserve was established; when Social Security, and then Medicare were instituted; and when Fannie Mae and Freddie Mac were nationalized, and the Troubled Asset Relief Program created.
In short, it was rewritten about the time that half of Americans were removed the tax rolls, and the other half ask to pay their way. When the U.S. became the entitlement state.
The nation’s founding document, the Declaration of Independence, states that to secure the natural rights of life, liberty and the pursuit of happiness “governments are instituted among men deriving their just powers from the consent of the governed.” Fulfilling that promise, eleven years later, the Federal Constitution was adopted in accords with its ratification process of 9 of 13 states.
In the end, ratification was unanimous amongst all 13 states.
It was a bold experiment in republican government that depended, James Madison said, upon the virtue of the people. At the Virginia ratifying convention, he famously said that without it, “No theoretical checks, no form of government can render us secure. To suppose that any form of government will secure liberty or happiness without any virtue in the people is a chimerical idea.”
In Bantam’s introduction to its edition of the Federalist Papers, Garry Wills writes that both Madison and the Federalist’s other author, Alexander Hamilton, “admitted that a corrupt people can exist, making for a government that would accommodate that weakness.”
Now that ObamaCare is the law of the land, it is abundantly clear that the nation’s original social contract, based on the consent of the governed, has been completely revoked by the people’s representatives. That it has been replaced by a corrupt charter of redistributionism.
Far from the constitutional republic that was once designed to preserve private property rights, this nation has now devolved into a tyranny of welfare recipients, who believe they are entitled to the wealth of others without ever earning it for themselves. Who justify bankrupting the many because, they suppose, it will only be at the expense of the few.
Overwhelmingly, the American people rejected the government takeover of health care, and yet 219 House Democrats chose to defy their clear will, and to instead indulge the whims of those who depend upon government as its willful benefactor.
The nation’s social contract, although it was lawfully made, has abruptly been revoked without amendment to the Constitution, the only just means of altering our free form of government. It was rewritten without any lawful referendum by the people of the United States.
Unfortunately, there will be a price to be paid.
Previously, Moody’s has warned the U.S. that “If the current upward trend in government debt were to continue and become irreversible, the [nation’s Triple-A debt] rating could come under downward pressure.”
ObamaCare will cost $2.5 trillion over ten years once fully implemented and will most certainly add much of that to the debt. Unless it is repealed, it is clear that this upward trend in government debt will almost certainly become irreversible. The die has been cast.
According to Cailleteau, as the “distance-to-downgrade” closes, the U.S. will “have to decide what level of pain they are willing to accept to have a healthy economy.” This means painful cuts in spending to reduce the debt burden, or even more painful increases in taxes to pay for the unsustainable growth of government. Which will the nation’s representatives choose?
With the passage of ObamaCare, it is agonizingly clear that the U.S. has chosen the path of ever-higher taxes, debt, inflation, and near-certain insolvency over any limits on spending.
Congress has entered the financial Abyss willingly. And as the Ship of State rapidly spins to the bottom, its ability to borrow money from overseas will deteriorate in tandem. To keep from taking on water, the government will increasingly turn to taxpayers to foot the bill.
It is then that we will learn whether a social contract imposed by force, rather than by consent, can be enforceable. Time will tell.
Bill Wilson is the President of Americans for Limited Government.
