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Tuesday, October 8, 2013

So what will actually happen if Congress doesn’t increase the debt ceiling?

The Federal Government Can’t, and Won’t, Default on Its Debt Obligations
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John Hinderaker
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One remarkable aspect of the shutdown/debt limit battle is the irresponsibility (on the part of the Obama administration) and incompetence (on the part of the news media) concerning the claim that the federal government will default on its debt obligations if Congress fails to raise the debt limit. President Obama and his minions have clearly suggested that default is a real possibility:

(Obama is a liar. The state run news media just repeats what he says. The ONLY way the government can default is if the fraud obama tells the treasury not to pay the interest due on the national debt. Under the US constitution the president has the power to either pay or not pay the interest on the national debt. Everyone should be aware of this but they are not and obama isn't going to tell you the real truth.) Story Reports

The government’s debt obligations will be paid, but reductions in other spending will start to become necessary. In effect, leaving the debt ceiling as is would function as a spending cut. This is why the Democrats hate the idea so much. They know there is zero chance of default, but they are horrified at the prospect that voters and taxpayers may find out that there is a relatively simple way to bring about spending reductions that would create, in effect, a balanced budget. Hence the hysteria.

The question is, if Congress does not raise the current debt ceiling, will the federal government run out of money needed to pay its existing debts? The answer is clearly No.

On average the federal government’s daily expenditures are about $16.7 billion; receipts are about $14 billion, implying an average daily borrowing requirement of about $2.7 billion. So the planned flow of revenues is now about $650 billion less than the planned flow of expenses…about $2.7 billion a [business] day, $650 billion annually.

So the “default” scenarios are bogus. Interest on the $16 trillion in debt is covered by a factor of about 10x by revenues! That puts the federal government deep into AAA land. Revenues would have to fall by a staggering 90% to jeopardize interest payments.

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