I have written before that the debt ceiling is the only thing that can force fiscal discipline on the federal government. Given that government “revenues” are almost $3 trillion a year, that is more than enough to meet all interest and principal payments on the outstanding federal debt but not enough to cover all government expenditures – hence the continuing and growing deficit. The debt ceiling would force the federal government to prioritize its spending by placing a limit on its ability to continue to borrow. Of course if the debt ceiling is not raised the UA would default but is that necessarily a bad thing. Most people seem to think that a default would mean that the US would default on the interest and principal payments. But that would be a choice made by the Treasury and the president. In reality, there is more than enough to pay on the debt as promised, social security, the military and medicare. What would be missing would be the 25 percent left to pay all government workers and fund all government programs. Thus, the government would default on its obligations to its employees and not to its debt holders. In essence federal workers would be faced with what workers face in the private sector when their employers go out of business. If this is not catastrophic for the private sector then why is this catastrophic for the government? As it now stands, federal workers have been sheltered from facing the consequences stemming from a bloated government making irresponsible decisions. Of course the government will choose to shut down parts of the government that will create the most pain amongst its citizens in order to force the continuation of unlimited largesse. Nonetheless, the day of reckoning is going to come if we continue on the path that we are on. I consider this more irresponsible that the termination of unnecessary spending and growth of the size of the government. I wrote before that the congress should just say "no". I reiterate that plea.
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com