Don’t Be Fooled By All the Loose Talk of Default

I want to quote from a Politico article about the GOP’s willingness to refuse either to raise the debt ceiling or to pass a continuing spending resolution, but before I do, I want to point out that their discussion of default and pretty much all you’re reading and will read about default is wrong.

In order to default, the government would have to stop paying its “public debts,” which means the servicing of our bonds.  The Treasury takes in about $200 billion in taxes every month, which is more than we need to pay those debts.  We can avoid default without raising the debt ceiling, and there is no real reason for financial markets to freak out or for our credit rating to be downgraded.

On the other hand, Social Security payments are not “public debts,” and failing to send those checks is not a default.

If you don’t have enough money to pay all your bills, but you pay your mortgage and your car loan, you may not have enough to heat that house or put gas in that car, but you are not in default on your home or car loan.

From “Double trouble:  House GOP eyes default, shutdown,” Jim VandeHei, Mike Allen, and Jake Sherman, Politico:

“House Republicans are seriously entertaining dramatic steps, including default or shutting down the government, to force President Barack Obama to finally cut spending by the end of March.

“The idea of allowing the country to default by refusing to increase the debt limit is getting more widespread and serious traction among House Republicans than people realize, though GOP leaders think shutting down the government is the much more likely outcome of the spending fights this winter.

“GOP officials said more than half of their members are prepared to allow default unless Obama agrees to dramatic cuts he has repeatedly said he opposes. Many more members, including some party leaders, are prepared to shut down the government to make their point.”

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