Raising The Default Roof
As GMU economist Veronique de Rugy has repeatedly pointed out, the debt ceiling debate is largely irrelevant. The United States will not default on it’s debt. In fact the 14th Amendment essential requires the United States to honour all it’s debts:
“The validity of the public debt of the United States, authorized by law, …. shall not be questioned…”
If no deal is struck the U.S. is still obliged to make good on it’s debts and it is up to the Treasury to find the money to make it’s debt payments. I.e. if Congress neither authorized a debt ceiling increase nor passes a set of spending cuts the only remedy, that conforms with the U.S. Constitution is for the Executive to cut spending at it’s discretion.
If the debt limit is reached and programme are cut it will ultimately be President Obama’s call on what and where to cut. But in any case it is unthinkable for the U.S. to default on its debt since it still has plenty of assets and an healthy revenue stream. Constitutionally, the U.S. government is required to sell off the Washington monument and close down the Pentagon before it defaults on it’s debt. And it certainly will never come to that.
Congress and the Executive would certainly be lynched by angry mobs of taxpayers well before then.
Incidentally, government spending in 1996 was 20% of GDP (still much too high for my taste) and the economy was in pretty good shape as Bill Clinton is want to often point out. Why not an across-the-board cut to 1996 funding levels?
