If the President (and his Senate) fail to reach a deal on raising the debt ceiling on October 17th, will the federal government go into default? Only if Barack Obama wants it to, because it’s entirely in his hands.
Monthly revenue can easily cover the amount America must spend to service its debt. On top of that, monthly revenue can keep Social Security, Medicare, and Medicaid fully funded — even at the bloated and obscenely wasteful levels at which those programs currently operate. In fact, America can even maintain all of its defense spending at current levels too.
What will happen on the 17th if no deal is reached? The federal government will be legally required to stop borrowing more money and adding to the debt.
Look at it this way. If you earn $5000 in salary every month, but you max out your credit cards by spending $6000 every month, the bank will eventually refuse to bump up your credit limit any further. When that happens, you can respond in several ways. You can cut your spending by $1000 and stay forever at the limit. You can cut spending by more than $1000 and start paying off your debt. Or you can refuse to cut your spending by at least $1000, and you’ll be unable to make payments on your debt. In other words, you can choose to go into default. If the only thing keeping you from cutting your spending is your fondness for steak, single malt scotch, Italian shoes, fast cars, and weekends in Vegas … the blame for your default is 100% yours.
Sound familiar?
If the Obama Administration announces that they’ll stop making interest payments on the national debt on October 17th, then they’ve voluntarily chosen that course of action. Nothing will force them into it.
There’s plenty of revenue coming in every month to keep America from defaulting on the debt. We do not have a revenue problem. We. Have. A. Spending. Problem.
