In case you missed it, I wanted to point out this Washington Post’s Fact Checker article yesterday about the debt-ceiling debate. First, Glenn Kessler notes, correctly, that the debt ceiling will ultimately have to be raised. It is a sad reality that under any of the proposed budgets out there, including Chairman Ryan’s, our debt will grow, at least for a while.
Second, he notes that “it is possible that the date of Aug. 2 is not etched in stone, either to make payments or for the markets to conclude the United States defaulted.” I am assuming that this statement rests in part on the fact that the date of our “imminent default if the debt ceiling wasn’t raised” has been moved back four times already from March 31 to August 2.
Nor is it true, as Treasury claims, that a default would be “unprecedented”:
“Unprecedented” may be a stretch. There are actually three instances when the United States could be seen to have defaulted on its obligations — in 1790, in 1933 and in 1971.
There have also been various individual state defaults over the last two centuries.
Kessler also takes issues with Senator DeMint and Congresswoman Bachmann, who he thinks make it sound as if avoiding a debt-ceiling increase is easy. He mentions that DeMint’s list of options available to Treasury if the ceiling isn’t raised on August 2 comes from two papers I wrote with my colleague Jason Fichtner (here and here). One of the options is that Treasury could prioritize interest payments to avoid a technical default. We also list a conservative set of assets that could be sold or used to continue to pay our bills once we hit the ceiling, such as cash on hand and TARP assets (we should sell these assets, debt-ceiling deal or not).
His issue isn’t with the options in our papers. Rather, it is that the lawmakers make it sound too easy:
Bachmann is correct that interest on the debt is less than 10 percent of the U.S. budget — see table 1.1 of this Congressional Budget Office report — but she makes it sound too easy. So does DeMint’s spokesman with his reference of returning to 2003 spending levels.
In any case, Bachmann, DeMint and other lawmakers opposed to a debt ceiling increase are making it appear much too easy to deal with a failure to reach a deal.
Kessler is right: It wouldn’t be easy. But I do not think anyone is under the illusion that it would be easy or painless to prioritize our payments, sell assets, or cut spending. Fichtner and I certainly aren’t under any such illusion, as we have made repeatedly clear. It will take lots of hard work to get ourselves out of this hole. But it would be incorrect to argue that it cannot be done, that the assets on our list are off-limits, or that cutting spending isn’t possible (especially cuts in the rate of growth.)
In fact, if we are concerned about how painful the options available to us are, I would argue that the longer we wait, the more painful any solutions will have to be. This is why it is critical to address the problem now, rather than later.
At some point, the debt limit will likely be increased. That’s not the question. The question is: When does it have to be raised, and under which circumstances?