Don't Raise the Debt Ceiling, Lower the Spending[*]

Writing in the Wash Times, Reason columnist and Mercatus Center economist Veronique de Rugy and her Mercatus colleague Jason Fichtner argue against raising the federal debt limit:

Sen. Pat Toomey, Pennsylvania Republican, proposes that the federal government prioritize paying the national debt above all other spending. The most recent Office of Management and Budget data shows federal revenues will reach $2.17 trillion this fiscal year. Interest payments on the nation's debt are estimated to be $205 billion this year, or about 10 percent of revenues. Taking that payment off the top, as Mr. Toomey's plan would, leaves $1.9 trillion for Congress to spend. That's enough to pay for Social Security ($741 billion), Medicare ($488 billion), and Medicaid ($276 billion), with $395 billion left for other programs.

Treasury Secretary Timothy F. Geithner called Mr. Toomey's bill "quite harmful" and "unworkable." And he used this analogy of a typical American homeowner to explain why: "A homeowner could decide to 'prioritize' and continue paying monthly mortgage payments, while opting to cease paying other obligations, such as car payments, insurance premiums, student loan and credit-card payments, utilities, and so forth. Although the mortgage would be paid, the damage to that homeowner's creditworthiness would be severe."

Mr. Geithner, however, mistakenly assumes that American homeowners always pay their expenses with borrowed funds (the way the government does). Most do not. When tough financial times hit, families eat out less, go to fewer movies, buy fewer clothes and postpone vacations. If those things don't save enough, then they might borrow money to pay bills or skip payments.

Go here for the whole piece.

And watch this 45-second vid about the topic here:

For more info on the debt limit, go here.

[*] For terrible headline allusion, go here.

And for a previous link to the very same de Rugy article in the Wash Times, go here.