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January 22, 2011
How to Freeze the Debt Ceiling Without Risking Default
How to Freeze the Debt Ceiling Without Risking Default
By PAT TOOMEY ( a Republican, is a U.S. senator from Pennsylvania)
As members of Congress debate whether to raise the U.S. debt ceiling—the limit on our government's debt—we should all agree on at least one thing: Under no circumstances is it acceptable for the U.S. to default on its debt. Not only are we morally obligated to honor our debts, but we benefit greatly from the nearly universal conviction that those who lend to us will always be repaid, on time and in full. We should never undermine that conviction.
Fortunately, even if Congress doesn't raise the debt ceiling, a default on our debt need not follow when our borrowings reach their limit in the next few months. I intend to introduce legislation to make sure of this.
For months, some political leaders and commentators have argued that failure to raise the debt ceiling would necessarily cause the U.S. to default on its debt. President Obama's Council of Economic Advisors chairman, Austan Goolsbee, recently warned, "If we get to the point where you've damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity. I don't see why anybody's talking about playing chicken with the debt ceiling."
In fact, if Congress refuses to raise the debt ceiling, the federal government will still have far more than enough money to fully service our debt. Next year, for instance, about 6.5% of all projected federal government expenditures will go to interest on our debt, and tax revenue is projected to cover about 67% of all government expenditures. With roughly 10 times more income than needed to honor our debt obligations, why would we ever default?
To make absolutely sure, I intend to introduce legislation that would require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised. This would not only ensure the continued confidence of investors at home and abroad, but would enable us to have an honest debate about the consequences of our eventual decision about the debt ceiling.
If we do not raise it, the government's tax revenue will enable us to fund roughly two-thirds of projected expenditures, including interest payments. Without the ability to borrow the other third, spending cuts would be sudden and severe: Projects would be postponed, some vendor payments would be delayed, certain programs would be suspended, and many government employees might be furloughed. Default would easily be avoided, but these cuts would certainly be disruptive. That's why I hope we can avoid this scenario.
But it would be even worse simply to raise the debt ceiling without regaining control of federal spending. The recent surge in spending, both in absolute dollars and as a percentage of our GDP, has driven us to record deficits and an explosion of debt. The growth in discretionary spending has been the most dramatic, but in the future mandatory entitlement spending will be the deficit driver. Congress must address both in order to put the government back on a sustainable fiscal path.
The vote on whether to raise the debt ceiling—and, if so, by how much—is our best opportunity to insist that any increase in our nation's debt be coupled with concrete steps toward fiscal sanity. Congress should make increasing our debt contingent on immediate cuts in spending and effective reforms of the spending process that helped get us into this mess.
For too many years, Congress has ignored or exacerbated the looming fiscal crisis created by overspending. Last fall's elections were largely a call to finally deal with this imminent threat, and the vote on the debt ceiling is Congress's opportunity to begin making real progress. We can do so without jeopardizing the full faith and credit of our country—and we should.
This article was sent to me in an e-mail sent out by Sen. Jim DeMint .
Dear Fellow Conservative:
I’m writing to share an important Wall Street Journal op-ed written by newly-elected Senator Pat Toomey (R-PA), which outlines how we can freeze the debt ceiling without defaulting on our debt obligations. Senator Toomey’s argument is nothing short of a game changer in the debt limit debate.
Senator Toomey correctly points out that if the debt limit is reached later this year, the government will still have plenty of money to service the national debt. He writes,
“In fact, if Congress refuses to raise the debt ceiling, the federal government will still have far more than enough money to fully service our debt. Next year, for instance, about 6.5% of all projected federal government expenditures will go to interest on our debt, and tax revenue is projected to cover about 67% of all government expenditures. With roughly 10 times more income than needed to honor our debt obligations, why would we ever default?”
Click Here to Read Toomey’s Op-Ed
Americans should reject the sky-is-falling-hysteria coming from President Obama and demand that Congress stop the debt and balance the budget. You can add your voice to this effort by signing the “Stop the Debt” pledge at http://StopTheDebtPledge.com.
Now is the time to make fundamental, long-term budget reforms that will stop the spending and save our country from fiscal ruin.
When the Senate considers the debt limit next month, Republicans must do everything they can to block an increase in the debt limit. Senator Toomey has presented the facts they need to fight back when they’re accused of threatening to put the nation in default.
I want to thank each of you who helped elect Senator Toomey last year by supporting the Senate Conservatives Fund (SCF). Without your support, he wouldn’t be in a place to influence this critical debate.
Respectfully,
Jim DeMint
United States Senator
Chairman, Senate Conservatives Fund
P.S. Senator Toomey’s leadership on this issue is an important reminder of why we must continue to elect true conservatives to the Senate.
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Wild Thing's comment.....
What Toomey is proposing is that out of the tax receipts, the first budgeted payments will go to the $200B debt service, and then, after that, programs and other spending will have to be cut. The way it is now, the spending side is holding the debt holder in front of them to protect them from the firing squad.
It will be the Day of Reckoning and we need to do it so that we can put a balance back in to the system.
Posted by Wild Thing at January 22, 2011 06:48 AM
Comments
Excellent plan. Toomey might have been in the Senate 6 years ago if George Bush had not thrown his support to the Rino Arlen Spector.
Posted by: TomR,armed in Texas at January 22, 2011 11:51 AM
Hooray, this is Arlen Specters replacement. One of our Guys. And Bush wanted to keep ole Arlen...ugh...Well now we got him.
Posted by: Mark at January 22, 2011 06:51 PM
Tom, thanks for mentioning that about Spector. I could never understand why Bush felt the need to do such a thing.
Mark, heh heh yes now we got him.
Posted by: Wild Thing at January 23, 2011 03:48 AM
