Worth Discussing

The debt ceiling dance

Doug Holtz-Eakin | Politico | May 18, 2011
Assets

It may take two to tango, but the House, Senate and White House will have to get in the same rhythm to raise the debt ceiling. And they will. Because they have to.

The need to raise the debt ceiling is a symptom of the broken budgetary past characterized by massive overspending. President Barack Obama’s bill is coming due; there is no cash on hand; and the debt ceiling will have to rise.

To see this, suppose the ceiling stayed in place. In rough numbers, the $2.3 trillion in revenues would easily be enough to cover $300 billion in debt service — no default would take place. But then it gets tricky. The remaining funds would nearly cover the $2.1 trillion in mandatory spending, but a $100 billion haircut would have to come first.

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Filed under: Free Market Economy, Spending And Debt, News, and Debt Ceiling