Assuming the accuracy of the polls discussed below, Americans are remarkably united on two points. One, our government should address the budget deficit only with spending cuts. Two, the time to start doing that is now. Specifically, Congress should not raise the debt limit.
A CBS Poll, released Friday, showed 77% wanted to reduce the federal budget deficit by only cutting spending. Only 9% supported raising taxes, and only an additional 9% supported a combination of spending cuts and tax raises. In a separate poll, 71% of responders opposed raising the debt limit above its current $14.3 trillion, a ceiling we can expect to bump up against in March.
On 6 January, Treasury Sec. Tim Geithner sent a letter to Congress, positing that the Four Horseman of the Apocalypse would be unleashed upon the world if Congress didn't vote to authorize an increase in the debt ceiling above $14.3 trillion. Would it?
According to the WSJ, the total amount required to service our national debt is actually quite low at the moment:
Total net payments amounted to $197 billion, or 1.4% of annual economic output. That’s a bit more than what the government spent on unemployment insurance.
If that is the case, why is it necessary at all to raise the debt ceiling? That is the thought of Felix Salmon, writing at Reuters:
Greg Ip [writing at The Economist] makes a very important point today, which I haven’t seen made anywhere else*: even if the US debt ceiling isn’t lifted, that doesn’t mean the government will default.
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.
With that in mind, perhaps serious consideration needs to be given to refusing to increase the debt limit and, instead, mandating immediate cuts to the budget. $197 billion ought not to be too had to find in a $3.55 trillion budget and it would put our government on a very different path - one to fiscal sanity. That is what the American people want, even if the left wing elite now in power considers that the end of the world.