Reporters, Democrats, and even some Republicans have begun repeating an infectious lie in the prelude to the debt ceiling debate. Secretary of Treasury Tim Geithner started it off and it has been repeated by reporters in print, on radio, and on television, including Fox News.
The lie is very simple: a failure to raise the debt ceiling will cause a default on American debt.
This is utterly and categorically a lie. Anyone who says otherwise is a liar.
Next year, about 7 percent of all projected federal government expenditures will go to interest on our debt. Tax revenue is projected to cover at least 70 percent of all government expenditures. So, under any circumstances, there will be plenty of money to pay our creditors.
Moreover, as the Congressional Research Service has noted, the Treasury secretary himself has the discretion to decide which bills to pay first in the event that a cash flow shortage occurs.
Nonetheless, the media and Democrats keep repeating the lie. And it is a lie.
Veronique de Rugy and Jason Fichtner chronicled debt ceiling fights in the Washington Times and, from their writing, we can categorically show it to be a lie to claim a failure to raise the debt ceiling will cause a default on American debt obligations.
In 1985, Congress waited nearly three months after the debt limit was reached before authorizing a permanent increase. In 1995, 4 1/2 months passed between hitting the ceiling and congressional action. And in 2002, Congress delayed raising the debt ceiling for three months. In each case, the U.S. and the economy survived.
Not only did the economy survive, but the United States did not default on its debt obligations, the United States did not lose its credit rating, and interest rates did not go up as a result of the default.
To say that failing to raise the debt ceiling will cause a default is a lie and anyone who says it is a liar.
If we fail to raise the debt ceiling and do default, it will not because because of a failure to raise the debt ceiling. It will be because Barack Obama and Tim Geithner chose to default for political gain.
Again, as Senator Toomey points out:
[A]s the Congressional Research Service has noted, the Treasury secretary himself has the discretion to decide which bills to pay first in the event that a cash flow shortage occurs. Thus, it is he who would have to consciously, and needlessly, choose to default on our debt if the debt ceiling is not promptly raised upon reaching it. It takes a lot of chutzpah to preemptively blame congressional Republicans for a default only he could cause.