The federal government will not run short of money to pay its bills on May 16, when the federal debt reaches the legal maximum of $14.3 trillion.
Even after Aug. 2, the deadline the Treasury Department set this week for Congress to lift the borrowing limit, the government might be able to delay a crisis, perhaps even for a few months, through extraordinary measures such as asset sales.
But with every passing week of stalemate over the debt ceiling, the risk increases that investors will start to fret that the United States will not pay its debts, and demand higher interest rates for loans to the federal government.
Should that happen, the cost could be vast and the damage difficult to reverse.
If the debt ceiling is always raised then why bother to have one at all? All the government seems to be able to do is spend without limit.
You know what, the Emperor has no clothes.
[i]In particular, they say, investors would view Treasury debt as risky and Washington would be forced to pay higher interest rates. [/i]
Good. That’s exactly what we need.
The debt scare mongers take us for fools. “It is inconceivable that the U.S. would default on its debt.” and other such blather. Here’s Sen Pat Toomey:
[blockquote] On last Sunday morning’s talk shows, Treasury Secretary Timothy Geithner once again implied that, if the debt limit is not promptly raised, the United States will default on its debt and the resulting catastrophe will be the fault of congressional Republicans. [/blockquote]
But in the liberals standard modus operandi, the debt ceiling vote is a crisis! Here’s Veronique de Rugy dispelling that nonsense:
[blockquote] While it is true Congress has never before refused to raise the debt ceiling, it has frequently taken its sweet time to do so. In 1985, Congress waited nearly three months after the debt limit was reached before authorizing a permanent increase. In 1995, 4 1/2 months passed between hitting the ceiling and congressional action. And in 2002, Congress delayed raising the debt ceiling for three months. In each case, the U.S. and the economy survived. [/blockquote]
Both quotes were from a [url=http://www.nationalreview.com/corner/265466/dont-raise-debt-ceiling-andrew-c-mccarthy ]good op-ed piece in NRO. [/url]
Another [url=http://www.marketwatch.com/story/double-dip-recession-is-now-undeniable-2011-05-05?reflink=MW_news_stmp ]op ed piece from Market Watch[/url] contains the following devastating assessment:
[blockquote] The truth is that a double-dip recession was temporarily held in abeyance through a massive government effort to boost consumption. But that intervention in free markets was destined to fail from the beginning. Quantitative counterfeiting Part 2 hasn’t even ended yet, and this ersatz economy that is based on borrowing and printing is already starting to falter. [/blockquote]
Can we now stop with the encouraging bubbles to encouraging sustainable growth?
The amount of debt subject to the limit can fluctuate on a daily basis. Plus there are steps the Treasury Department can take to stave off the day of reckoning. But Treasury Secretary Tim Geithner said such measures could only buy roughly 8 weeks in letter to Congress on April 4. What happens if Treasury hits the limit? Again, no one knows for sure since it has never happened. But the going assumption is that no good can come of it. Treasury would not have authority to [url=http://ameriloansearch.com/payday-loans/how-to-get-a-loan-with-no-fax.html][b] get a loan[/b][/url]. And that can be a problem since the government borrows to make up the difference between what it spends and what it takes in. It uses that borrowed money to help fund operations and pay creditors. In short, if lawmakers fail to raise the ceiling this year, they will have two choices, both awful. They could either cut spending or raise taxes by as much as $738 billion just to cover the period from April 1 through Sept. 30, which is the end of the fiscal year. Or they could acknowledge that the country would be unable to pay what it owes in full and the United States could effectively default on some of its obligations.