Hitting the Debt Limit ≠ End of World

Contrary to popular Washington memes, hitting the debt limit would not end the world as we know it:
The [Bipartisan Policy Center] study found that the United States is likely to hit the debt limit sometime between August 2 and August 9. “It’s a 44 percent overnight cut in federal spending” if Congress hits the debt limit, Powell said. The BPC study projects there will be $172 billion in federal revenues in August and $307 billion in authorized expenditures. That means there's enough money to pay for, say, interest on the debt ($29 billion), Social Security ($49.2 billion), Medicare and Medicaid ($50 billion), active duty troop pay ($2.9 billion), veterans affairs programs ($2.9 billion).

That leaves you with about $39 billion to fund (or not fund) the following:
  • Defense vendors ($31.7 billion)
  • IRS refunds ($3.9 billion)
  • Food stamps and welfare ($9.3 billion)
  • Unemployment insurance benefits ($12.8 billion)
  • Department of Education ($20.2 billion)
  • Housing and Urban Development ($6.7 billion)
  • Other spending, such as Departmens of Justice, Labor, Commerce, EPA, HHS ($73.6 billion)
The decision to prioritize payments would fall on the Treasury department, and Powell points out it would be chaotic picking and choosing who gets paid (in full or partially) and who doesn't.

Powell notes, however, that Congress made sure during a budget standoff in 1996 that Social Security recipients would not be affected. “In 1996, during an impasse, [Treasury Secretary] Bob Rubin gave the Congress notice that he would be unable to pay the March ’96 Social Security payment. Congress immediately—and I mean, immediately—passed a law that allowed the Treasury to borrow money specifically for that purpose and exempted that borrowing from the debt limit.”
Why should we cut another blank check for Obama and his cronies when American voters believe that spending cuts are a much better idea?
A new Rasmussen Reports national telephone survey finds that 55% of Likely U.S. Voters now think decreases in government spending help the economy. Twenty-four percent (24%) believe decreased spending hurts the economy...
Now is the time for the GOP to stop listening to the New York Times, Politico, the Washington Post et al. and do what's right ― for once.

2 comments:

  1. What part of "Limit" is there a misunderstanding about?
    But when it comes to certain applications like speed limit, limited freedom... these they know well!

    ReplyDelete
  2. Just blogged about this as well. It seems like a steady line against raising the debt limit (ever) would be painful, to be sure, but might be the last, best hope the people have of stopping the run-away freight train of spending. I'm beginning to think this would not only not be the end of the world, but perhaps the beginning of real, albeit painful, desperately-needed actual spending reform.

    ReplyDelete

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