On October 3, 2013, Jeffrey Dorfman writes in Forbes:
Ignore what you hear and read in the news. The federal government actually reached the legal debt ceiling about four months ago. Since then, the government has been financing its monthly budget deficit by stealing/borrowing money from other government funds, like the federal government employees’ pension fund. In about two weeks, the government will run out of tricks to keep operating as if nothing has happened. If the debt ceiling is not raised by then, the government has to balance its budget.
That’s right. As much as the politicians and news media have tried to convince you that the world will end without a debt ceiling increase, it is simply not true. The federal debt ceiling sets a legal limit for how much money the federal government can borrow. In other words, it places an upper limit on the national debt. It is like the credit limit on the government’s gold card.
Reaching the debt ceiling does not mean that the government will default on the outstanding government debt. In fact, the U.S. Constitution forbids defaulting on the debt (14th Amendment, Section 4), so the government is not allowed to default even if it wanted to.
In reality, if the debt ceiling is not raised in the next two weeks, the government will actually have to prioritize its expenses and keep its monthly, weekly, and daily spending under the revenue the government collects. In simple terms, the government would have to spend an amount less than or equal to what it earns. Just like ordinary Americans have to do in their everyday lives.
Once the reality of what hitting the debt ceiling means is understood, the important question is: can the government actually live with a balanced budget? How much money could it spend? Could enough spending be cut to live within a balanced budget? The answer is yes, the federal government could live with a balanced budget.
…Having established that the government could continue to operate without an increase in the debt ceiling, let’s also make clear the opposite position. President Obama has repeatedly claimed in the past few weeks that raising the debt ceiling does not increase the national debt. He says it is just a necessary step so the government can pay the bills Congress has already voted to incur. This is not true.
An increase in the debt ceiling allows the government to continue to run a budget deficit, which by simple accounting means that the national debt will increase. Not raising the debt ceiling does not mean defaulting on the current debt, but rather that no new debt can be incurred.
Raising the debt ceiling is like having the credit limit increased on your credit card. Technically, having a higher credit limit does not force you to spend beyond your means and end up with a higher balance on the credit card. However, it makes it much more likely, especially you are not good at handling money responsibly.
I think we can all agree that our national politicians are not financially responsible. Giving them a credit card with a higher limit is sure to end with them using that extra credit and hitting the new limit. Thus, conservatives in Congress should only agree to raise the debt ceiling in exchange for real and immediate spending cuts (not future hypothetical ones) and other changes that justify burdening the country with additional debt.
The Treasury Department has said the debt limit must be raised by Thursday, October 17, 2013, or it will run out of borrowing authority. That would leave it dependent on just cash on hand and incoming revenue from taxes and fees to pay the federal government’s bills. Whether that is enough revenue to fully pay our outstanding debt obligations has yet to be documented. The increased debt ceiling adjustment would provide assurance that the federal government could borrow more to cover the outstanding debt not covered by existing revenue, but also it would provide more room to expand the debt until the next debt ceiling is reached.
The Just Third Way movement advocates policies and structural reforms to our system, which will result in a balance budget and provided economic security and income sources from productive capital ownership and jobs as we build a future economy capable of supporting general affluence for EVERY citizen.
Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm. See the full Act at http://cesj.org/homestead/strategies/national/cha-full.pdf
