Defaultophobia

We keep hearing from the Obama Administration, and from other associated Democrats, that if the debt ceiling isn't raised by some date (from last week to next August or so) the United States will default on its debt. Most of the associated Democrats keep saying that hitting the debt ceiling means an automatic default by the United States, with all the economic damage that would entail. Treasury Secretary Tim Geithner is being more reasonable and responsible, reporting that he can move money around among accounts (including taking "contributions" — involuntarily — from government workers' pension funds) and can delay the government's default until August. (Geithner is asking for a debt ceiling increase that will let the Administration keep at their profligate spending until after the 2012 election.) These people keep making these statements in hopes of panicking Congress into raising the debt ceiling without any attempt to rein in the spending that is the cause of this problem.

The problem with these scary statements is that they are untrue. The Obama Administration and its associated Democrats are simply lying. Default, if it occurs, will be the Obama Administration's deliberate choice.

How can I say that? Easy! The government takes in a lot more income than is necessary to pay the interest on the debt and to redeem government bonds as they mature. Of course, applying that income to debt service will require cutting spending in other areas. By a lot. Not borrowing (or printing) still more money will also require cutting spending. By a lot. Will that be painful? Yes — a lot more painful than if the Democrats come to a spending cut agreement with the Republicans. Plus, if they do that, they can work out a deal to get a debt ceiling increase — hopefully a more limited one — in the bargain.

Thus, again, any default will be the deliberate choice of the Obama Administration. And all their prattling about automatic default is just demagogic scaremongering.