Here’s my two-cents on the calamity du jour (namely, the possible ‘failure’ to raise Uncle Sam’s debt ceiling).
In response, Roger Garrison sent to me the following e-mail (posted here in full with Roger’s kind permission):
I enjoyed your “Capping the Debt Hyperbole.”
You mention, though, that the government could “choose to default.” Well, if default means that you’re unable to pay, then “choosing to default” must mean that you “choose to be unable to pay.” Hey, that really does sound like government-speak. But I think a more accurate and more revealing term is “renege.”
Another point. Remember that the government’s authority to spend rests with Congress, while the debt limit is set by Congress. So, on the one hand (the left one), the government would allow more spending, while on the other hand (the right one), it can’t exceed the debt limit. Now, which hand do we think will win this little arm-wrestling match.
One more point. The debt limit was first set in 1917. During the 94 years since then, the limit has been raised (by the left hand) more than 100 times—more than once per year. Isn’t there a close kinship, here, between debt limits and New Year’s Resolutions? The main difference is that New Year’s Resolutions are broken only once per year.
Only when the subject of the conversation is government do most participants in that conversation treat seriously the notion that ensuring a debtors’ future solvency – and signalling to skeptical creditors that that debtor is indeed taking sensible steps to reduce its debt – requires that that debtor renege on its previous commitment to keep its borrowing from going above a certain level.