Facts about the debt limit

Contrary to all the lies coming out of the White House and the liberal mainstream media, a refusal by House Republicans to raise the debt limit is not the same thing as forcing the United States to default on its debt. As reported in the Washington Post, Moody's Investors Service has published a memo stating:

We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact. The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default. [emphasis added]

The federal government reports the national budget figures as follows (see here and here):

1. In FY2013, the federal government will receive revenues of approximately $2.7T.
2. In FY2013, the federal government will have expenditures of approximately $3.7T.
3. IN FY2013, the federal government will have interest expense of approximately $416M.

Thus, although items 1 and 2 taken together reveal that the federal government will run a deficit of approximately $1T in FY2013, nevertheless, items 1 and 3 taken together demonstrate clearly that the government has approximately 9x the revenue coming in as is required to pay interest on our debt. So, there is, as Moody's correctly points out, absolutely no need to default. The only thing that can possibly cause a default is if President Obama makes a deliberate and premeditated decision not to service the debt, but opts instead to continue spending incoming revenues on bloated government programs.

It is all so simple. There is no need for the government to stop making payments on its debt (which, yes, would have catastrophic consequences for global financial markets). Rather, the government simply needs to figure out how to stop spending the extra $1T a year more than it is taking in so that it does not need to borrow any more. Families and businesses in the private sector face this challenge every day. If more money is going out than is coming in, then it's time to prioritize, tighten the belt, and figure out how to trim the spending.

Furthermore, Barack Obama himself, when he was a senator, opposed raising the debt limit. Said Senator Obama:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. ...Increasing America’s debt weakens us domestically and internationally. Leadership means that 'the buck stops here'. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

At the time, Senator Obama was urging Congress not to tolerate an increase that would bring the debt ceiling to $9 trillion. The current debt ceiling, which President Obama wants raised, now stands at $16.7 trillion, or 85% higher than it was when Senator Obama said that raising it would represent a failure of leadership.

So, the facts may be summarized as follows:

1. not raising the debt ceiling does not entail a default on our debt,
2. we are running a deficit of $1T a year,
3. Obama himself opposed raising the debt ceiling 7 years ago,
4. the debt ceiling is now 85% higher than when Senator Obama opposed it.

Given these facts, it would be unconscionable for the House Republicans to do anything else than to stick to their guns and demand that the President avoid a debt crisis by cutting back on bloated Federal spending.