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Federal Budgets, Debt Ceilings, and Democratic Lies

Wednesday, July 13, 2011, 12:11 EDT Leave a comment Go to comments

Debt ceilingAfter almost two years of failing to pass a federal budget, Congress (which, until last fall, was under total Democratic control and is now split) is arguing about whether or not to raise the statutory debt ceiling in order to allow it to pass a budget that further adds to the national debt.

The pro-ceiling-increase side (the Obama Administration and Congressional Democrats) is pushing it as a simple end-run around fiscal Armageddon, with the President out front. In his Monday press conference, he likened gazillions of dollars in new federal debt to a Band-Aid on a cut or a helping of nutritious food:

The president said today he would not accept a smaller, short-term deal. “We might as well do it now,” he said. “Pull off the band aid. Eat our peas.”

[ . . . ]

“And so if in fact [Republican leaders] Mitch McConnell and John Boehner are sincere, and I believe they are, that they don’t want to see the U.S. government default, then they’re going to have to compromise just like Democrats are going to have to compromise; just like I have shown myself willing to compromise.”

Today, CNN jumps on the bandwagon:

President Obama has put the country on notice that he can’t guarantee Social Security and other government checks will go out if the debt ceiling isn’t raised by Aug. 2.

So it’s worth reviewing just what the fallout could be if lawmakers fail to act on time — either in early August or sooner if markets start to lose confidence that Congress will get its act together.

Nearly half of all government checks won’t go out: The Treasury Department would be unable to pay between 40% and 45% of the 80 million payments it needs to make every month, according to an analysis by the Bipartisan Policy Center.

Why? It’s basic math: The United States doesn’t bring in enough revenue to pay all its bills — with monthly deficits averaging $125 billion.

It’s possible, indeed likely, that Obama doesn’t understand that the word “default” used in the context of debt is a specific term meaning failure to make timely payments on that debt, not withholding of retirement checks. Hell, he doesn’t understand anything else about economics and finance, so why should he understand the vocabulary? But his threat also reveals another lie politicians have been telling us for years: there is no “Social Security trust fund” to ensure payment of benefits to retired people. If there were, then the status of the rest of the federal budget would be immaterial to the timely issuance of Social Security benefit payments, because employers and employees keep paying FICA taxes even when Congress isn’t doing its job.

As for CNN’s questionable claims, Reuters columnist James Pethokoukis notes that the federal treasury could continue paying “essential” defense, Medicare, Social security, and interest on its current debt at least throughout the month of August without further borrowing. There would probably be enough money left to also fund enough personnel to get the Social Security payments out on time. So failure to raise the debt ceiling would not, at least in the short term, necessitate either defaulting on debt payment or starving granny.

So why do Obama, Congressional Democrats, and at least one cable news organization keep insisting that Social Security payments and payment on debt will be the first to go? Because those items aren’t their highest priority. They’re merely their most valuable bargaining chips, which in a sense makes them the lowest priority, the things Democrats are quickest to sacrifice in order to get what they want. That isn’t a position that is likely to engender patient understanding on the part of voters or viewers, a strong plurality of whom are apparently smart enough to oppose a debt ceiling increase.

(Hat tip on the Reuters and Gallup pieces: Glenn Reynolds.)

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