Friday, July 15, 2011

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.

No comments: