The always-animated Prof. Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, was on SiriusXM’s POTUS this morning, even more fired-up than usual.
He noted that life without a debt-ceiling deal after August 2 would be comparable to a government shutdown, inconvenient for some but not unprecedented and by no means the economic Armageddon some in the administration have suggested. And he insisted that the U.S. default is entirely avoidable even if no deal is reached in the next week.
“There is absolutely no possibility that we have to default on our debt,” Morici said. “We will only default if Secretary Geithner chooses to default to give the president political advantage.”
A fuller version of Morici’s argument can be found in his column from this morning:
Be clear, the U.S. doesn’t have to default on its bonds. After Aug. 2, it still will collect taxes and other revenue exceeding $180 billion per month; and interest payments on the national debt eat up less than $30 billion. If the Treasury prioritizes expenditures — as the state of Minnesota did during its recent shutdown — it could pay interest on bonds, roll over bonds coming due, and pay Social Security recipients and many other obligations, but it would be late to many vendors until the debt ceiling was raised or new sources of cash were found. The U.S. would not be insolvent but rather in a political crisis.
This morning on the radio, Morici elaborated, “The markets are starting to recognize this. I went to CNBC this morning with a stellar cast — you’ve never seen the green room so crowded at 4 in the morning. Because everyone thought the Asian markets were starting to panic. Guess what? They didn’t.”
He noted that the state of Minnesota just endured a government shutdown that represented a short-term irritation, but by no means an economic crisis: “There were still state troopers on I-35 and the prisons had guards and the welfare checks went out. Now, granted, they had the money and their shortfall was much less, more like 10 percent than 45 percent. But the reality is, this looks a lot like a government shutdown. Different things may get shut down. For example, in a normal government shutdown, the White House chef continues to work,” Morici said. “Well, maybe if Mr. Obama wants the Social Security checks to go out, he and Michelle can scramble eggs for the girls.”