As the sun rises in the east, the debt ceiling will be raised. Getting there, however, will be harrowing. Which is a good thing.
Treasury Secretary Tim Geithner warns that failure to raise the limit would be disastrous. In that he is correct. But he is disingenuous when he suggests that we must do so by Aug. 2 or the sky falls.
There is no drop-dead date. There is no overnight default. Debt service amounts to about 6% of the federal budget and only about 10% of federal revenues. This means that for every $1 of interest payments, there are roughly $9 of revenue the government spends elsewhere.
Move money around — and you’ve covered the debt service. Cover the debt service — and there is no default. What scares Geithner is not that we won’t be able to pay our creditors but that his Treasury won’t be able to continue spending the obscene amounts of money (about $120 billion a month) it doesn’t have and will (temporarily) be unable to borrow.
Good. The government will (temporarily) be forced to establish priorities. A salutary exercise.