The Real Choice about the Debt

A vote for default is a vote for higher taxes.

While it is currently true that government revenues exceed interest payments, once a default occurs interest rates will rise. As soon as interest payments exceed government revenues, because the spending on the remainder of government (defense, border patrol, state department, Federal court) can never go below zero, the only recourse left would be to raise taxes. Even printing money would be ineffective because interest rates would only rise higher because of inflation expectations.

Confusion about the 14th Amendment

There has been much discussion about the coming debt ceiling limit deadline to avoid a default by the U.S. government. Capital Gains asks "Is August 2 Or July 22 The Day The Government Turns Into A Budget Pumpkin?" People seem to be confusing two different concepts: "default on" and "abrogate".

To default on debt means not paying the debt in the time and amount originally agreed to. To abrogate debt means to repudiate or reduce the amount of the debt. Section 4 of the 14th amendment clearly prohibits abrogation of the debt. I do not see any restriction on defaulting on the debt.

The point is that some in Congress are talking as if not raising the debt ceiling would result in abrogating the debt. After a default, the debt will still be there and much harder to repay as lenders would be reluctant to extend us the money to even rollover the existing debt.

Let us hope that wiser heads prevail in this discussion.