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The cost of ‘default’

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It looks almost certain that we’ll crash into the “debt ceiling,” which really isn’t a ceiling in any meaningful sense, since every previous close encounter has ended with the limit on debt blown higher into the stratosphere, accompanied by negligible increases in fiscal responsibility.  The much-maligned sequester inserted into the Budget Control Act of 2011 at Barack Obama’s insistence is just about the only real spending restraint that ever emerged from one of these debt ceiling “crises.”  It’s laughably puny – but so unusual, as an act of real fiscal discipline, that it still stands out like a neon sign above the sea of red ink – and if the Democrats get there way, it’s about to disappear.

At this point, given the sorry history of debt ceiling encounters, I’m leaning toward doing away with it altogether.  It serves little purpose beyond providing a faint illusion of responsibility, which is deeply dishonest.  The new Obama demand is more debt, on and on forever, without meaningful debate.  Let’s just be honest about the boosters firing on our rocket ride into insolvency, and stop pretending that anything short of total impending collapse (in about 10-15 years) is going to make a difference, barring a major electoral sea change.

No one is quite sure what will happen when we hit the debt ceiling; the only lead-pipe certainty is that Obama is lying through his teeth when he scaremongers about “default” on our sovereign debt.  The government brings in more than enough revenue to cover debt service and other mandatory costs.  Not as much more as we might like, mind you, but enough.

It’s widely considered that the instability of a debt-ceiling crash will lead to higher financing costs on the titanic mountain of national debt, which Obama will have more or less doubled by the time he leaves office – an achievement in sheer irresponsibility unmatched in the annals of presidential history.  And you may rest assured nobody that comes after Obama will be doubling the debt he leaves behind.  As thoughtful students of our long-range budget forecasts have been warning for some time, the American economy will completely shut down long before anyone can turn Obama’s $20 trillion debt into $40 trillion.

Obama has taken to calling the prospective increase in debt financing costs “the Republican default tax.”  Yes, Sir Tax-a-Lot has a boatload of nerve criticizing anyone else for a tax increase, and it’s doubly deranged for him to appropriate the same argument his critics have been making, when they warn that the merry shower of greenback confetti blowing from the quantitative easing bandwagon has to end eventually.

If we resolve all our fiscal problems over the next couple of years, Obama’s successor will have the pleasure of watching interests costs on his debt gobble up billions more in federal revenue.  It’s going to happen sooner  or later… so maybe sooner is better.  The super-low cost of financing all that debt has allowed politicians to rack it up like never before.  Eventually those costs will rise – Obama’s policy preferences will earn us universal downgrades from the global credit rating agencies soon enough, as they’ve been very clear about their growing unease with the federal government’s credit-card shopping spree.  Maybe it’s better for those costs to rise now; maybe it would have been better still if they rose a few years ago, leading to public outrage that might have put the brakes on deficit-palooza.  

Perhaps it would have been advantageous for the American people to have a realistic idea of the long-term cost of financing those Big Government spending programs before they voted in the last election.  As it stands, they’ve been suckered into the socialist equivalent of a balloon mortgage, and the con artists who sold it to them are hoping to scamper out of town with their carpet bags full of loot before the interest rate blows up.


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