17 May 2011

Certainty and Promises

Why is this even being debated?

A split among economists over whether a debt ceiling vote should be tied to spending cuts highlights the risk of overconfidence, despite a consensus opinion in the latest Journal survey that the ceiling will be raised before an August deadline.

I’m not sure how to mention this, but the debt ceiling is a very effective way of ensuring spending cuts.  See, the promises of future spending cuts are simply words.  Words that can be changed, ignored, or overruled.  The debt ceiling, on the other hand, is pretty certain.  Once the ceiling is hit, no more debt can be taken on.

So, the easiest thing to do to cut spending is to simply vote no when it comes time to raise the debt ceiling.  Congress will be forced to cut spending, period.  There are no ifs, ands, or buts about it.

Incidentally, failing to raise the debt ceiling will not, as has been claimed, cause or necessitate a default.  Default is tied to debt payments, not revenue.  A business doesn’t go into default if its revenue declines from May to June; it defaults when it fails to pay its debt.

Also, this current level of spending is unsustainable.  There will be cuts eventually.  We may as well get them over with.

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