The Debt Ceiling Crisis and Biblical Economics

An interesting week for biblical economics: the longstanding voice in the wilderness Ron Paul announced he is retiring from Congress to focus on a presidential bid and the crisis over the debt ceiling. In many ways prompted by tea party ideological intransigence, Paul has brought what were once considered extreme, fringe, even “crackpot” economic views to bear on the American economy and potentially the global economic system.

At Slate, David Weigel wrote about Paul’s retirement, noting that he was leaving behind a Republican Party that had “finally learned to love him.” But in his affectionate send-off, he wrote only about Paul’s ties to the Austrian school of economics and said nothing about his ties to the Reconstructionists. 

While the tea partiers love Paul, the affection within the GOP itself may be short lived, as Aaron Blake at the Washington Post argues. The new GOP coalition, built on tea party support, is breaking down over the debt limit crisis.

A couple of months back Republicans (acting like Republicans) were demanding that, in exchange for the debt ceiling increase, there be substantial budget cuts and a strategy to reduce the debt. 

But now tea partiers like Michele Bachmann are saying they won’t vote to raise the limit at all and are claiming that the administration is exaggerating the impact a default will have. Moreover, they’re so sure about the tea party members staying in line on a vote, they’re going after Republicans who want to cut a deal. My local tea party group, First Coast Tea Party, for example, is calling members to gather at Florida Senator Bill Nelson’s office today to urge him to vote against a debt ceiling increase.

Bachmann’s stance on the debt limit is not unlike Sarah Palin’s opposition to the Federal Reserve that I wrote about here in November 2010.

Both are rooted in what I described at a “theocratic reading of the Bible, arising out of the nexus between (Ron) Paul (and now his son, Senator-elect Rand Paul), Howard Phillips and his Constitution Party, and Gary North and the Christian Reconstructionists.”

But Bachmann’s position on the debt ceiling is likely more significant than Palin’s on the Fed because her view could win the day. It’s much harder to make something happen (eliminating the Federal Reserve) than it is to keep something from happening (raising the debt limit).

When tea party leaders like Bachmann seem to think default won’t be Armageddon, they appear to be parroting simplistic theories for public consumption. But for proponents of biblical economics, there’s a much deeper motive. As I explained in the November 2010 piece on the Fed:

North’s overarching schema is that there is an impending social collapse which will provide the opportunity for biblically-based Christians to exercise dominion by replacing existing humanistic institutions with biblical ones. In Honest Money, he wrote:

“First, the bankers and the politicians will continue to try to make the present system work. This will make the present system worse. Second, there will be a collapse in stages: inflation, then mass inflation, then price controls, then tyranny, and finally a worldwide deflationary depression. At that point, there will be new demand from the voters for answers. Third—and this is my hope and my prayer—people will at last decide that they have had enough moral and legal compromise. They will at last decide to adopt a simple system of honest money, along with competitive free market principles throughout the economy.”

In fact Gary North (who at one time worked for Rep. Paul) is currently describing the debate over the debt ceiling as political theater. But that’s because he is sure Congress will vote to increase it and, ultimately, he doesn’t think it matters. For North, default of the U.S. economy is inevitable; he argues that it has already begun.

We know who he thinks will pick up the pieces.