Congress did not raise the debt ceiling today, and the national debt reached that limit. But the sky did not fall as the Obama administration said it would.
Today the national debt rose to $14.294 billion, equal to the debt ceiling. That’s the legal limit on how much the government may borrow. Treasury Secretary Tim Geithner then did what he had already admitted that he could do: move money among various funds to pay principal and interest on Treasury bills, notes and bonds that their holders handed in for payment. He did this by skipping payments into the federal pension fund, and even borrowing against it. (New Jersey voters will see at once that New Jersey’s governors have done exactly this for more than 15 years; the first to borrow against the State pension fund was Christine Todd Whitman.)
Geithner warns on debt ceiling
Geithner sent another dire warning to Senate Majority Leader Harry Reid (D-NV), saying that he can keep moving money around until August 2, but if Congress does not act by then, the country will not be able to pay bondholders on time. The country will then be in technical default. Geithner said that if that happens, bondholders will sell off US debt securities, interest rates will rise, and the economy will fail.
Does anybody believe that?
Bondholders seemed to take the news in stride. Prices of Treasury paper actually went up, not down. As bad a shape as the US government’s finances are in, the finances of several countries in Europe, especially Greece, are in worse shape, and the bondholders know it.
In fact, Representative Jim Jordan (R-OH), leader of the Republican Study Committee, flatly denied that the US government would default on bond and note payments without a raise in the debt ceiling. He said that the only reason for the government to default would be for Geithner to let the government go into default. Jordan called on Congress and the administration to make hard calls on which things to spend money on first, and recognize that the government can’t spend money on everything.
Carl Lantz, an interest-rate specialist at Credit Suisse, seemed to agree. He said that no one in the bond market believes that a default will happen. He has a point: yields on Treasury bonds and notes went down, and yields on Treasury bills, the shortest-term instruments, went up, but not by much.
This hasn’t stopped Democratic Party officials (both elected and appointed), and their enablers in the mainstream media, from saying that the Republicans are playing deadly games with the debt ceiling. Republicans simply refuse to agree to raise the debt ceiling unless Democrats agree to cut spending by the same, or roughly the same, amount as any raise would be. The Atlanticcompares this to a “controlled burn” in a forest fire: burn a few dead trees and twigs to stop a fire from spreading. The problem, says The Atlantic, is that if the wind shifts, the fire leaps over the burned patch, and the forest burns down anyway.
But these officials and commentators still offer no evidence that any such scene will play out for any reason beyond their direct control. Jordan is right: if the country defaults, it will be the Democrats’ fault, not the Republicans’. The Republicans, and their Tea Party voters (not to mention their freshman class), have warned the Democrats repeatedly that they would not raise the debt ceiling unless the Democrats were willing to cut spending. And today, several prominent Republicans said openly that President Barack Obama and his officials are not serious.
Of course they’re not serious. Since Obama took office, he has followed the program that Richard A. Cloward and Frances Fox Piven laid down in 1965: collapse the system under “the weight of the poor,” and put a communist dictatorship in place. In 2010, the American people elected a new class of Representatives with orders to stop this, and took the Democrats’ super-majority away from them in the Senate.
A real solution
Senator Pat Toomey (R-PA) has introduced a bill to stop all payments beyond principal and interest on Treasure bills, notes and bonds, if not stopping them would risk a default. He has 22 co-sponsors in the Senate, and Rep. Jordan has 93 co-sponsors of a similar bill in the House. That bill is the answer to the problem, and the answer that the voters in 2010 voted for. Raising the debt ceiling any further will not solve the basic problem.
An ordinary consumer has no right to raise his own credit limit when he wants. Neither should the government. When the government does it anyway, that’s hypocritical.