We’ve all heard a lot about default.
DEFAULT LOOMS! screeches the Huffington Post
The right is blaming the left. The left is blaming the right.
You might have wondered, as I have been wondering, why is the left so lathered up if this is hurting the GOP so badly? As we near the apocalypse, OFA takes a dark turn.
There are suggestions that Obama wants to destroy the US economy. Tempting as that is, no worries. Remember the sequester? Remember all the end of the world stuff from the left back then?
Default is not going to happen. Period. Here’s why:
Chart courtesy of Freedom Works
Few know what default is. Default consists of failure to service the debt. If you look at the chart above, you will see that debt service runs about $20 billion per month. The US government takes in about $200 billion in tax revenues every month. That’s more than enough to service the debt.
Slowing down IRS refunds and EITC payments to illegal aliens is inconvenient, but it is not default.
One of the nation’s top credit-rating agencies says that the U.S. Treasury Department is likely to continue paying interest on the government’s debt even if Congress fails to lift the limit on borrowing next week, preserving the nation’s sterling AAA credit rating.
In a memo being circulated on Capitol Hill Wednesday, Moody’s Investors Service offers “answers to frequently asked questions” about the government shutdown, now in its second week, and the federal debt limit. President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.
Not so, Moody’s says in the memo dated Oct. 7.
” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.
The memo offers a starkly different view of the consequences of congressional inaction on the debt limit than is held by the White House, many policymakers and other financial analysts. During a press conference at the White House Tuesday, Obama said missing the Oct. 17 deadline would invite “economic chaos.”
The Moody’s memo goes on to argue that the situation is actually much less serious than in 2011, when the nation last faced a pitched battle over the debt limit.
“The budget deficit was considerably larger in 2011 than it is currently, so the magnitude of the necessary spending cuts needed after 17 October is lower now than it was then,” the memo says.
Treasury Department officials did not immediately respond to requests for comment.
No comment? No surprise there.
The money is there to service the debt and so there will be no default unless Barack Obama specifically directs Jack Lew not to service the debt.
And I bet that that won’t happen, because I know the money is there and now so do you. There will be inconveniences, but no default. The world would know that Obama did it needlessly and so would history, and I doubt he would risk it. That is, unless he really does want to destroy the economy.
What’s that? You’re wondering why the media hasn’t told you this? Indeed.
It’s time to call the bluff.