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Redstate...
Might Someone Please
Educate Fox News and the Rest of the Media?
Posted by Erick Erickson
Monday, January 31st
Fox News has an article on its website about John Boehner’s remarks on
raising the debt ceiling. But in this objective report there is a great
and dangerous falsehood. The article, which has no author attached to
it, reports
In order for the debt ceiling to rise, Congress must approve taking on
more debt, which currently is growing by more than $4 billion per day.
If it doesn’t approve raising the ceiling, then the U.S. will default
on its loans and lose its standing as the globe’s most reliable bet.
There is no other way to put this than it is an out and out lie.
In fact, Neil Cavuto interviewed Senator Pat Toomey back on January 6,
2011, and Toomey himself noted
The debt service, interest on our debt is about 6 percent of everything
the federal government has to pay. So, we would be taking in enough
revenue to cover more than 10 times all the interest that we owe. There
is no reason we would have to default on our interest obligations.
That is it precisely. Greg Ip noted in the Economist a couple of weeks
ago
A default would result from failure to pay principal or interest. The
debt ceiling doesn’t bar either. Treasury can roll over maturing issues
so long as the overall stock of outstanding debt doesn’t rise. (A
caveat: Treasury must invest surplus Social Security and Medicare taxes
by issuing non-marketable debt to the plans’ trust funds, which erodes
the remaining capacity for marketable debt.) As for interest, even in
today’s straightened circumstances, revenue is more than enough to
cover interest charges.
Felix Salmon, writing for Reuters, expands on Greg Ip’s point.
In any given month, the government’s income dwarfs its debt-service
obligations, which means that the government could simply pay all
interest on Treasury bonds out of its cashflow. Greg hasn’t run the
numbers on principal maturities, but I’m pretty sure that they too
could be covered out of cash receipts—and when that happened, of
course, the total debt outstanding would go down, and we wouldn’t be
bumping up against the ceiling any more.
The point here is that the government has enormous expenditures every
month, and debt service constitutes an important yet small part of
them. If the debt ceiling weren’t raised, it stands to reason that just
about any other form of government spending would get cut before Tim
Geithner dreamed of defaulting on risk-free bonds.
It is, in other words, flat out not true that a failure to raise the
debt ceiling will cause a default on American obligations.
The media continues to get it wrong.
Read the article at Redstate...
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