Not raising the debt limit is simply running a balanced budget.
Yes, that’s right: The President and Congress may have to balance the federal budget in the next few days! Horrors!
Let’s get some clarity here. When the federal government hits the debt limit it does NOT mean that it can’t borrow or that it can’t pay existing debts. It just means it cannot continue to run a deficit. Spending becomes limited by revenue, and existing debt may be replaced by new debt. The government just can’t add MORE debt.
That means the government has to prioritize. The obvious priorities are:
* First, pay principal and interest on existing debts to avoid default. (There is plenty of tax revenue for this.)
* Pay the military and spend what is necessary for defense. (There is plenty of tax revenue for this, also.)
* Pay for other programs authorized by the Constitution. (Ditto)
* If money is left over, pay debts previously incurred for programs not authorized by the Constitution. (There will not be enough for this, so they will have to be closed down and paid off over time.)
This is the basic situation that Washington, D.C., its hangers-on, and the mainstream media think is so terrible.
Granted, suddenly balancing the budget may not be pretty. The states will have to take up some of the services the feds have been running on borrowed money. But they can do it better and more efficiently, anyway. (Colorado already is responding by keeping Rocky Mountain National Park open during the partial federal shutdown.)
Even if it’s not pretty, the history of other indebted nations during the last few decades—including our neighbor Canada—shows that shock treatment may be the best way for a country to get its fiscal health in order.