Why the U.S. could use a strategic default

By Jeff Reeves

ROCKVILLE, Md. (MarketWatch) — It is a sad situation when hard-working CEOs and money managers who make this country great must watch a bloated federal budget waste our hard-earned money.

Millions of Americans claim they are old, sick or laid off — and, instead of working for an honest livelihood, employ all their time begging for a government handout. They drive up the national debt with their dependence, and they are responsible for the current budget mess we are in.

I think it is agreed by all parties that this prodigious spending is deplorable. So amid the current debate over the debt ceiling, I feel compelled to offer my Modest Proposal to fix our free-spending ways: a strategic default on our debt.

It’s a strategy employed by many homeowners underwater on their five-bedroom homes in Las Vegas, and it’s one we should put to use on a national scale. It’s time we put an end to criticism for our past behavior and not allow ourselves to be held hostage by creditors.

America, it is time we just walk away.

Politicking over the debt ceiling has brought the chance of a default to the forefront. But, even if Congress could reach a compromise before the Aug. 2 deadline, this would be the wrong decision. As in the case of a homeowner who must bend over backward to pay a mortgage on a home worth a fraction of the original loan’s value, it’s simply not worth the effort.

It is better to simply wash our hands of this mess, suffer the short-term pain and come out a better nation on the other side. As you’ll see, there are clear benefits to a strategic default on our national debt and a decision to simply stop paying the bills.

The end of the welfare state

The shutdown of government spending will serve short-term needs in balancing the budget and address long-term budget problems we face due to the Nanny State mentality in Washington.

Take Medicare, one of the biggest causes of our current budget trouble. If we slash spending dramatically, we will not only eliminate one of the biggest drains on the U.S. Treasury, but we will also fix the nagging demographic problem caused by the baby boomers living longer and clogging Social Security rolls.

Without health care, surely few of our seniors will survive into old age. This will dramatically reduce both future Medicare and Social Security payouts.

These socialist programs are part of the problem. It’s time to make them part of the solution.

The restoration of free markets

Even worse than these big-ticket programs are the money-wasting programs that actively undermine our free-market system.

For instance, why do we dish out $12 billion for the Department of the Interior? It’s time for Uncle Sam to get the sticky fingers of regulators off trees and rocks once and for all. They exist in nature just fine on their own — and, if parks can’t compete in a digital age, they have no one to blame but themselves. When an agile and innovative timber company pulls into town, the market should decide who succeeds and fails.

And that’s just for starters.