Is the White House bluffing about an imminent default on the $16.7 trillion national debt? Is the debt ceiling crisis just a made-up D.C. myth meant to frighten young children?
Heretofore, the story coming out of the U.S. Treasury has been that if the government’s borrowing limit is not increased come Oct. 17, the U.S. will default on its debt for the first time.
Besides the verbal threats that have been issued by the President on an ongoing basis, a 2012 Treasury Inspector General’s report on the 2011 debt ceiling debacle claimed there was no way the Treasury could distinguish between debt service payments and regular expenditures when the limit is reached, “While Congress enacted these expenditures, it did not prioritize them, nor did it direct the President or the Treasury to pay some expenses and not pay others.”
The report continues, “because Congress has never provided guidance to the contrary, Treasury’s systems are designed to make each payment in the order it comes due.”
Meaning, there would be no way for the Treasury to pay interest owed to creditors without extra borrowing authority, right? After all, the payment systems won’t allow it. Right?
Well… that might not be true after all.
Besides the fact that the government takes in an average $250 billion in revenue each month yet only owes $35 billion a month in interest this fiscal year, and can refinance existing debt up to the limit, both President Barack Obama and Treasury Secretary Jack Lew are now stepping all over themselves to redefine what a default actually means.
In short, they are capitulating on their principal threat to refuse to pay the debt. How do we know that?
On CNN’s State of the Union, Candy Crowley explicitly asked Secretary Lew if the government could “just pay the interest rate on these debts while this is worked out,” and Lew refused to answer the question.
Instead, Lew chose to equivocate with responses like, “They are willing to concede that if we don’t pay interest and principal on the debt, that that’s bad. Well, you know, it is bad, but there are a lot of things that are bad. You can’t pay all the bills if Congress doesn’t raise the debt ceiling.”
Emphasis on an inability to pay “all the bills” — he’s saying that other items besides the debt might not be paid — but nowhere did Lew say he would fail to make debt service payments. That failure let the cat out of the bag.
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Robert Romano is the Senior Editor of Americans for Limited Government.