Arnold Williams (notebuyer) wrote,
Arnold Williams
notebuyer

The Panic About Debt Ceilings

For those reading panicky articles about either Republicans voting against raising the debt ceiling, Democrats deciding to mimic Obama's vote against, and the US defaulting:

Take the third off the table. One of the more interesting financial analysts out there points out that even if the debt ceiling is not raised, there need be no default. He's got a lot of experience running the numbers, and saw things before, so is worth taking seriously.

Quick version:

In any given month, the government’s income dwarfs its debt-service obligations, which means that the government could simply pay all interest on Treasury bonds out of its cashflow. Greg hasn’t run the numbers on principal maturities, but I’m pretty sure that they too could be covered out of cash receipts—and when that happened, of course, the total debt outstanding would go down, and we wouldn’t be bumping up against the ceiling any more.

Less panic. More thought.
Tags: politics
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