The United States of America isn’t going to default on its debt, even if Congress doesn’t increase the statutory borrowing authority in the next couple of months. Everyone in Washington knows, or should know, this. Any assertions to the contrary are tantamount to (perish the thought!) playing politics with the debt ceiling.
This is the second time in less than two years that the nation finds itself at this juncture, with Republicans in Congress threatening to hold the debt ceiling hostage. Some lawmakers are willing to shut down the government in order to pressure President Obama to agree to spending cuts.
A shutdown is certainly possible. A debt default? Not gonna happen.
Why? Because the income taxes withheld from most of our paychecks each month exceed the interest the Treasury owes on its debt outstanding. In November, for example, the Treasury’s interest expense totaled $25 billion. That compares with tax receipts of $161.7 billion. The ratio varies from month to month, but what comes in more than covers what goes out in debt service.
Without an increase in the $16.394 trillion debt limit, the federal government can’t pay all of its bills: It borrows 40 cents of every dollar it spends. Still, “debt service would come first,” said Lou Crandall, chief economist at Wrightson Icap in Jersey City.