EDITOR OF REDSTATE
Might Someone Please Educate Fox News and the Rest of the Media?
Fox News has an article on its website about John Boehner’s remarks on raising the debt ceiling. But in this objective report there is a great and dangerous falsehood. The article, which has no author attached to it, reports
In order for the debt ceiling to rise, Congress must approve taking on more debt, which currently is growing by more than $4 billion per day. If it doesn’t approve raising the ceiling, then the U.S. will default on its loans and lose its standing as the globe’s most reliable bet.
There is no other way to put this than it is an out and out lie.
In fact, Neil Cavuto interviewed Senator Pat Toomey back on January 6, 2011, and Toomey himself noted
The debt service, interest on our debt is about 6 percent of everything the federal government has to pay. So, we would be taking in enough revenue to cover more than 10 times all the interest that we owe. There is no reason we would have to default on our interest obligations.
That is it precisely. Greg Ip noted in the Economist a couple of weeks ago
A default would result from failure to pay principal or interest. The debt ceiling doesn’t bar either. Treasury can roll over maturing issues so long as the overall stock of outstanding debt doesn’t rise. (A caveat: Treasury must invest surplus Social Security and Medicare taxes by issuing non-marketable debt to the plans’ trust funds, which erodes the remaining capacity for marketable debt.) As for interest, even in today’s straightened circumstances, revenue is more than enough to cover interest charges.
Felix Salmon, writing for Reuters, expands on Greg Ip’s point.
In any given month, the government’s income dwarfs its debt-service obligations, which means that the government could simply pay all interest on Treasury bonds out of its cashflow. Greg hasn’t run the numbers on principal maturities, but I’m pretty sure that they too could be covered out of cash receipts—and when that happened, of course, the total debt outstanding would go down, and we wouldn’t be bumping up against the ceiling any more.
The point here is that the government has enormous expenditures every month, and debt service constitutes an important yet small part of them. If the debt ceiling weren’t raised, it stands to reason that just about any other form of government spending would get cut before Tim Geithner dreamed of defaulting on risk-free bonds.
It is, in other words, flat out not true that a failure to raise the debt ceiling will cause a default on American obligations.
The media continues to get it wrong.