The government “not paying for all sorts of things” is how Tom Foreman messily defined a default on the debt-ceiling for the Chicken Littles of his news network. In one of many doom and gloom debt-ceiling segments for state broadcaster CNN, Foreman forewarned that a default on the country’s debt “would not be just about D.C., but it could be about YOU.”
In the same phillipic, Foreman carelessly conflated a debt default with a failure to raise the debt ceiling before its Oct. 17th deadline. But then President Pain has been setting the tone for the media, having accused Republicans, in his “Oct. 8 news conference on the shutdown and debt limit,” “of refusing to “meet our country’s commitments, pay our bills,” and of generally precipitating an “economic shutdown.”
The notion, however, that not raising the government’s credit limit must necessarily result in a default on the debt is untrue. The government takes in approximately $250 billion a month in revenue. Servicing the national debt costs about $30 billion a month. Three trillion dollars is what the federal government expects to loot in the fiscal year that began on Oct. 1, 2013 and will end on Sept. 30, 2014.
On reflection, the U.S. Treasury collects enough to pay down the interest on the debt as well as a portion of the principal.
Claiming that the president is powerless to prioritize won’t wash either. “There is no constitutional feature that says the president cannot allocate revenues,” David Stockman told Lou Dobbs. Paraphrased, the director of the Office of Management and Budget under President Ronald Reagan said this: Unless President Obama orders it, there will be no default on the government debt, because Obama has the power to prioritize and allocate the revenue coming in. Oct. 17 is a phony date, designed to intimidate Republicans—and anyone trying to stand against a massive increase in the “public debt.” The Beltway is silent about the ability of the president to honor the country’s debt, because of an opposition to entitlement reform.
Not to be outdone, the president has further asserted that “… raising the debt ceiling … does not add a dime to our debt.” (I confess to being impressed with this bit of logic, coming as it does from a man whose reasoning skills are hardly robust.)
Too true. “Technically, having the credit limit increased on a credit card does not force you to spend beyond your means and end up with a higher balance on the credit card,” averred Professor Jeffrey Dorfman of the University of Georgia. “However, it makes it much more likely.”
Increasing the credit limit on the deadbeat U.S. government’s credit card—it owes 17 trillion gigabucks and counting—guarantees more spending.
The distinction between the country’s “debt obligations” to bondholders and its “expenditures”—what Foreman called “all sorts of things”—seems to befuddle the president. Said Obama: “… we’ve got a lot of other obligations, not just people who pay Treasury bills. We’ve got … senior citizens who are counting on their Social Security check … We have veterans …farmers who are waiting for loans.”
And there are the promises made under the Medicare and Medicaid programs. But these are promises, not debts. Spending programs are not to be equated with debt.
David Henderson of the Library of Economics and Liberty’s EconLog made quick work of this fallacy: The president “is effectively saying that if the government wants to spend x and has only enough money to spend 0.67x, then not spending on the other 0.33x is a failure to keep an obligation. In a political sense, that might be: the government has made a lot of spending promises to a lot of people. But in an economic sense, it’s not.”
What this president has excoriated as a Republican demand for ransom is entirely reasonable. It is not a first for one party to use a government shut-down or the debt limit to get a policy concession, added the Cato Institute’s Chris Edwards during a Fox-Business broadcast. President Obama and the Democrats excluded Republicans from the Obamacare negotiations. The Patient Protection and Affordable Care Act got no Republican votes in both Houses. Unilateral decisions on Obamacare made by Obama have been the order of the day. Using the levers available to them to get changes in a rotten law is hardly unusual or unreasonable on the part of the Republicans.
How nice it would have been had Republicans stood firm; had they refused to raise the debt ceiling—and horrors!—forced the government to balance its budget. Alas, they’ve already been shoehorned into “exploring … a short-term increase in [said] ceiling.” The forces arrayed against the GOP are formidable. There are just too many Americans grubbing for free stuff and a preponderance of Republicans eager to parcel it out in exchange for power.
Considering the U.S. government’s set-in stone spending, the real phony construct is the debt-ceiling itself. In the words of economist and philosopher Anthony de Jasay, placing a ceiling on the federal debt is “a measure whose only effect is to oblige the Congress to raise the debt ceiling every time the rising debt catches up with it.”