The default boogyman card is being played again. The last time it was used was during the Continuing Resolution debate a month or so ago. RINO John Boehner swallowed it, hook, line and sinker. The dems are playing it again to get the Debt Limit raised higher than the current $14.2 Trillion limit.
Austan Goolsbee, Chief Accountant of Obama’s Economic Recovery Advisory Board, claims that the country would be in “instant default” if “we hit the debt limit.”
Goolsbee Says Tying Debt Ceiling to Spending Is ‘Quite Insane’
May 11, 2011, 10:49 AM EDTBy John McCormickMay 11 (Bloomberg) — Linking efforts to reduce long-term federal deficits with a congressional vote to raise the government’s debt limit puts U.S. credit at risk, President Barack Obama’s chief economic adviser told a Chicago audience.“To tie this to the debt limit is, in my view, quite insane,” Austan Goolsbee, chairman of the Council of Economic Advisers, said today to the Chicagoland Chamber of Commerce and other business leaders.
Yes, I suppose to a lib, anything that would limit spending is insane. The truth is that the government wouldn’t automatically default—unless Obama purposely did so.
You see, the US government still has an income. US Revenues for this current year are projected to be over $2.2Trillion. The problem is the dems want to spend over $3.8Trillion.
Have you heard about these nuts who think that the world is going to end in May?Which is to say, Austan Goolsbee is full of it. He told the Chicagoland Chamber of Commerce: “If we hit the debt ceiling, we default.”No, we don’t.Debt service accounts for about 7 percent of federal spending. Current revenues will more than cover that, regardless of whether the debt ceiling is raised. We can pay our debts — and our troops, too — out of present revenues. But if we fail to raise the debt ceiling, we’re going to have to economize on some other things: discretionary spending, for sure, but probably also Social Security, Medicare, and Medicaid. But here’s the thing: Any meaningful budget-reform deal is going to have to address discretionary spending, Social Security, Medicare, and Medicaid, in the long term. There is no way around that. (Defense spending needs to be cut, too, but defense is a different thing from farm subsidies and NPR money: a core national priority. You don’t lump national defense in with national embarrassments such as the Small Business Administration or research grants for Obama’s magic unicorn-powered economy.)Default? No.In truth, the federal government expects to collect $2.2 trillion in revenue this year. The problem is that it wants to spend $3.8 trillion.You can do a lot with $2.2 trillion. You can fund Social Security, Medicare, Medicaid, SCHIP, debt service, unemployment, welfare, and national defense at their 2008 levels. My recollection of 2008 is that it was not exactly a time of Spartan fiscal discipline.
Funding the majority of the federal government at 2008 levels is not “default.” It’s not anything like default. It’s not in the same category of things, events, or concepts as default.So, don’t buy what Austan Goolsbee is selling.(Go here for the complete column.)
Your statement that not raising the national debt limit does not necessarily mean the U.S. has to default on its debt obligations (I.e., interest payments on bonds and bills) is indeed correct. Treasury will have to decide what to pay and what not to pay. The statement that we need only revert to 2008 spending levels is completely incorrect. In fiscal year 2008, we spent over 2.9 trillion dollars and this does not include spending for the wars in Iraq and Afghanistan. Based on your correctly disclosed estimated revenues, Treasury would have to cut over $700 billion in total expenditures. I am not advocating any particular liberal or conservative position (I am a 2 decade long Independent), I am just tired of the many distortions and omissions of fact that are so prevalent these days.
Also keep in mind that while federal spending as a % of GDP is approximately 24% (much higher than the past 50 year average of just over 18%), federal receipts is under 15% of GDP – well below both the historical average and the amount needed to balance the annual budget assuming we are able to reduce spending to the oft-mentioned 18% benchmark.