In a recent New York Times article, the following words appear:
“If the current $14.29 trillion debt ceiling is not raised, the government would ultimately have to default on its debt; without borrowing, it would not be able to pay both the government’s daily bills and investors whose bonds have come due. That prospect is widely decried as unthinkable by business leaders and economists. Ben S. Bernanke the Federal Reserve Chairman, told the Senate that it would be a “recovery-ending event.”
Ok. Now listen to this economist. We don’t have to raise the debt ceiling to avoid default on the federal debt. In fact, by making minor cuts to federal spending, we can avoid default and enhance the image and credit worthiness of the United States of America.
The necessity of raising the debt ceiling, which is supposedly the only way to avoid default on Federal bonds, is the latest bold face lie cooked up by Tim Geithner, politicians, and east coast investment houses. These same fear tactics were used to sell the TARP program. Like Chicken Little, they are now telling us that unless the debt limit is raised the sky will fall. They even say that raising the debt ceiling will calm investor fears and make foreign investors more likely to buy our bonds!
All of this is a lie and a wrongful deception. According to the Congressional Budget Office, Federal expenditures in 2010 were $3.456 trillion dollars. Only $197 billion, or 6% of the federal budget was spent for interest on the national debt. Take a look at the other expenditure categories. Medicare and Medicaid are 23% of the federal budget. Social Security, Defense, and Discretionary expenditures each eat up around 20% of federal spending.
Instead of raising the debt limit why don’t we cut Medicare, Medicaid, Social Security, Defense, and Discretionary expenditures by a mere 1% each? That leaves us with plenty to pay the paltry 6% needed for bond interest. There is absolutely no need to increase the debt ceiling.
The bottom line is that politicians of both parties don’t want to cut spending, which is our real problem. Call your senator or congressman and tell them to shave a mere 1% from each of the five programs mentioned above. Balancing our budget by cutting spending instead of more borrowing (raising the debt limit) would tell the world that Uncle Sam is committed to fiscal responsibility. This would do a lot more to enhance the fiscal credibility of the US government than anything else.