WendyMcElroy.com

I have just returned from travels. The bad thing about travels is that, when on the road, I tend to watch television, which means television news, which means for the last week or so I've been treated to an unending series of televised cretins repeating the manufactured talking point that the U.S. will be in "default" if the debt ceiling isn't raised.

Bunkum.

Here is a simple parallel, which I would hope most news anchors and perhaps a few politicians are able to comprehend. You have a credit card with, say, a $5000 credit limit. You've been making payments every month, but you have also been charging more every month than you have been paying off. So, your balance on the card has been rising. You have now reached your credit limit. Your options are now:

a) Ask the bank for a higher credit limit; or
b) Reduce your credit card spending to the amount you're paying off each month (or less).

Option (b) is not a default. As long as you're making the minimum payment on the card -- enough to cover the interest on the outstanding balance -- you are not in default. You only default when you refuse to make the minimum payments.

Similarly, as long as the FedGov continues to make the interest payments on the debt (and continues to roll over debt as it matures), the U.S. is not in default.*

I'm seeing the "default" meme being pushed hard by those who have a vested interest, namely, politicians who want to extend their spending spree, and newscasters who want a sensational story. It's all spin, and bullshit. Don't be conned.


* Note, I'm not advocating that the U.S. continue to tax to service its debt. I'm sympathetic to some aspects of the "repudiate the debt" movement. My purpose here is merely to point out a blatant falsehood.