There is a lot of fuss these days about the chaos and breakdown to society should those on Capitol Hill fail to pass a bill allowing the government to continue borrowing money. One of the statements that keeps getting made is that the Federal government would "default" on its debt and that would be the worst possible thing. Most of this is just hype, emotions, and nonsense.
The Federal government is spending around $3.8 trillion annually, with interest on the debt just over $400 billion annually. We are running about a $1.4-1.6 trillion deficit and thus "need" to borrow that amount to continue spending at present levels.
Can I point out a couple of obvious things? First, a default on debt is only a default if you stop making payments! With the numbers above, we can still make payments, we just can't continue spending at our present levels. Second, nothing is going to crash and burn. The markets aren't going to fail. Again, all this talk of 'default' is just emotion and crying wolf. I think the leadership in Washington is afraid that if they didn't get the debt limit increased, and nothing happened, it would provide more evidence that we actually don't need the government to spend our future away!
As for the talk of compromise, a $2-4 trillion deal is nonsense. Spread out over 10 years, that comes to $200-400 billion per year. We are running $1,500 billion per year over budget. $200 billion is a waste of our time and energy. When they start talking about $10 trillion over 10 years in savings with a balanced-budget amendment, then we might have something! Until the, the man behind the curtain is blowing smoke to cover his butt. Does the leadership in Washington have the guts for this? Alas, no. But let's not fool ourselves into thinking anything is being solved, nor be fooled into thinking any disaster will strike were they not to do something. Perhaps the best that could happen is for them to do nothing. Now wouldn't that be something.
