Debt Limit Opportunities

Educating the Public by Playing Chicken–by James A. Bacon in The Washington Times:

I’m really enjoying the debate over the debt ceiling. The best part is watching Obama administration spokesmen issue dire warnings over the hideous fate that will befall us if Congress fails to raise the $14.3 trillion cap to a level sufficient to accommodate another trillion or two in deficit spending this year.

Here’s what Treasury Secretary Timothy F. Geithner had to say: “Failure to raise the limit would precipitate a default by the United States. Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs. Even a short-term or limited default would have catastrophic economic consequences that would last for decades.”

And here’s Austan Goolsbee, White House economic adviser: “This is not a game. … If we hit the debt ceiling, that’s … essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on our economy would be catastrophic. I mean, that would be a worse financial crisis than anything we saw in 2008.”

Both gentlemen are absolutely right: A default by the U.S. government upon its national debt would be a catastrophic event, although it could be quickly, if only partially, mitigated by the expedient of raising the ceiling after the fact. If financial markets collapse into chaos, Congress still has the option of authorizing more borrowing.

What could not be remedied easily after the fact would be a default caused by the inability of the U.S. government to meet its massive debt obligations because investors lose confidence in Uncle Sam’s ability to meet its obligations – debt limit or no debt limit.

Read the rest here: Debt Limit Opportunities

 

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