Thinking the Unthinkable

For as long as I can recall, it has been an article of faith that a failure to raise the debt ceiling would be a national disaster. As the latest vote on the subject approaches, however, there are some who are now questioning if this is the case. Simply put, would the failure to raise the debt ceiling result in a US default? Here is the essence of what senator Toomey of Pennsylvania has to say:

"[C]ongressional delay in raising the debt limit will in no way cause a default on our national debt. If Congress refuses to raise the debt ceiling, the federal government will still have more than enough money to fully service our debt. Next year, about 7 percent of all projected federal government expenditures will go to interest on our debt. Tax revenue is projected to cover at least 70 percent of all government expenditures. So, under any circumstances, there will be plenty of money to pay our creditors."

Of course, there would be the pressing question of how to cut 30% of all federal expenditures once debt was no longer available. What do we do? The US could withdraw from all foreign bases and wars and cut defense spending. There could be an end to federal construction projects. Social Security and Medicare could be cut. The truth is that it is well near impossible to cut 30% of federal spending without cutting payments under Medicare, Social Security, Medicaid and the Defense Department. So, the truth is that what senator Toomey says is interesting, but it is nonsensical at the same time. There is no question that all three of the big entitlement programs need to be modified so that they will stop growing so quickly. Indeed, maybe Medicaid could actually be cut back to the levels of coverage that existed in 2008 or even earlier. Cuts of that nature, however, cannot be made in a three week period while the debt ceiling is being debated. Similarly, a decision to pull US troops out of foreign bases to save money is one that could well make sense. It should only be done after all the costs and benefits are studied. National security should be handled in a responsible fashion, not as an afterthought in a debt ceiling debate.

In short, senator Toomey makes about as much sense to me as Michael Moore does when he claims that the national debt is just like a mortgage and the US need not worry about it. Strangely, Moore seems to want to change the national debt into a sub-prime mortgage.