There’s no reason to default, even without an increase in the debt ceiling:
Failing to cut Social Security checks does not constitute “default.” Neither does withholding checks intended for bureaucrats, veterans, or contractors. In the context of the federal government, “default” means a failure to make good on your debt-service payments. Our interest payments run about $30 billion a month, easily paid out of the roughly $3 trillion (or $250 billion a month) in revenue the federal government is expected to collect this year. You can do rather a lot with $3 trillion a year, but not as much as you can do with $3 trillion a year and a limitless line of credit. There certainly is no reason to default on $360 billion in interest payments when you have $3 trillion in revenue.
What can you do with $3 trillion a year? You can have Social Security ($880 billion), Medicare/Medicaid/HHS ($940 billion), Department of Defense and additional war spending ($672 billion), Veterans’ Affairs ($140 billion), NASA ($18 billion), Homeland Security ($55 billion), Transportation ($99 billion), Commerce ($9 billion), the Army Corps of Engineers Civil Works ($8 billion), Interior ($13 billion), State and international aid ($59 billion), Justice ($36 billion), the Small Business Administration ($1.4 billion), the EPA ($9 billion), the National Science Foundation ($7.5 billion), the Department of Energy ($33 billion), and the FDA ($4.5 billion) — and still have enough money to triple the budget at the National Park Service, because people love Yogi Bear and Booboo. Yeah, you’d have to close down the Department of Education, which does not one useful thing, and downsize the Treasury Department, perhaps even to the radical extent of shutting down its Healthy Food Financing Initiative (my apologies to the first lady), sell off the housing projects and close down HUD, and a few other things. I know, I know: radical austerity.
Rather, you could do all of that on $3 trillion — if you didn’t have $360 billion in payments on interest from past spending weighing down the budget. But since you do, take away the State Department and international relations, Homeland Security, Energy, Justice, NASA, DOT, Interior, Commerce, Civil Works, EPA, NSF, and SBA, say goodbye to the national parks and the guys who maintain our nuclear arsenal — all to finance past spending excesses.
Put another way, $3 trillion a year in revenue gets you federal spending at 2008 levels plus a small surplus. Not savage austerity, not the Hobbesian state of nature, not Somalia. That is what we are talking about in the debt-ceiling debate. Republicans are being criticized because they are demanding some modest spending cuts in exchange for raising the debt ceiling. But refusing to raise it at all would simply necessitate balancing the budget at pre-Obama levels of spending. Of course, the deficits we have run since then mean that about $100 billion more of that spending will have to go toward debt service in 2013 than in 2008. We are spending on spending.
And as the president used to claim to believe, before he doubled down on the spending, it’s “unpatriotic.”