All anybody in Washington can talk about these days is the debt limit or debt ceiling – the total amount of money the federal government is authorized to borrow at any given time. After a decade in which spending increased by more than 60 percent in inflation-adjusted dollars and the debt limit was raised no fewer than 10 times, the government is about to max out its $14.3 trillion credit line, leading to fears that Washington is going to default on its bonds, stop cutting Social Security checks, and destroy the economy more than it already has.

But the current debate over the debt ceiling is full of malarkey for at least three reasons.

1. August 2 is a phony deadline. Treasury Secretary Timothy Geithner has pushed back the drop-dead date when the U.S. finally reaches its limit a bunch of times already: March 31, April 15, May 31 were all cited as deadlines before August 2 was inked in as Armageddon. But this time, he means it, man, really.

2. Reaching the debt ceiling is NOT the same as defaulting on our debt – which would indeed be catastrophic.

Think about it: You can max out your credit cards but as long as you keep paying the minimum amount due each month, your creditors don’t go crazy. Interest on the debt is a small fraction of total outlays and the government has a series of tools – from using cash on hand to selling assets to scrimping on nonessential payments – to make sure interest payments are made and seniors aren’t put on an all cat-food diet.

3. Legislating-by-Panic is no way to run a country. The reason we’re in this mess is because government can’t stop spending. And the government can’t even pass a budget on a year’s notice. But we’re expecting them to come up with a good plan for the country’s borrowing in a couple of weeks? Trying to force through an expansion of the country’s credit line by promising cuts in spending down the road is exactly why we’re in this situation to begin with.

It makes far more sense to do something like sell some TARP assets — the government is sitting on $320 billion in outstanding direct loans and equities investments — to cover interest payments through the end of the fiscal year than to force Congress and the president to come up with a budget that cuts spending — and borrowing — for real, next year, not is some distant future.

For more information, check out Nick Gillespie’s 5 Uncomfortable Facts About the Wonderful, Horrible Debt-Limit Debate and Mercatus Center’s Jason J. Fichtner & Veronique de Rugy’s The Debt Ceiling: What is at Stake.

About 2.35 minutes.

Produced by Nick Gillespie and Meredith Bragg, edited by Joshua Swain.

Go to Reason.tv for downloadable versions, and subscribe to Reason.tv’s YouTube Channel to receive automatic notifications when new material goes live.

At a time when we face a $1.4 trillion deficit this year alone, why are we funding anything or anyone that is admittedly “nonessential”?

I have been pondering an analogy that ought to be easy for anyone to grasp. Let’s compare the current congressional battle over federal spending with a hypothetical family feud over your own household budget.

Suppose you and your spouse are arguing about your finances. You have discovered, to your horror, that you are spending $1,400 per month over and above your total household income. Terrified, you inform your spouse that this is completely insane and unsustainable, and that it must stop immediately.

Your spouse nods in nominal agreement — but then digs in his or her heels against every single specific spending cut that you propose.

Knowing of your partner’s stubborn, spendthrift ways, you eventually propose just $100 in reduced spending. That would still have you falling behind each month by $1300, but at least it’s a start. However, your spouse is outraged and rejects the figure out of hand; it’s “draconian,” and would undermine the profligate lifestyle to which you’ve become accustomed.

You argue, and argue, and argue. Getting nowhere, and desperate for any point of agreement, you say: “Look, can’t we cut just $61 from our monthly spending? We both know that this won’t even make a dent in our obligations, but at least it might slow our rush toward bankruptcy, if only by a few days.”

Still, your indignant spouse shouts “NO!” — then proclaims that he/she might be willing to cut only about $33 in monthly spending.

Now, it should be clear that, no matter which of you prevail, this would still leave you spending from $1,339 to $1,367 more each month than your total household income. You are still on the fast track to utter financial ruin.

And this is exactly analogous to the current fight in Congress over this year’s federal budget — except only for the position of the decimal points.

A bit of history. House Republicans were elected on their promise to cut $100 billion in spending from this year’s federal budget. That barely would have made a difference, merely reducing our gargantuan $1.4 trillion annual deficit to $1.3 trillion. But after encountering unmoving Democratic resistance, the GOP congressional leadership reduced their proposed spending cuts to around $61 billion.

Still, the Democrats dug in their heels and refused. Eventually, they declared their willingness to cut only about $33 billion. Right now, rumor has it that the negotiations are stalled over whether or not to split the difference at around $40 billion — a $7 billion gap between the two sides. That latter figure is a minuscule one-half of one percent of this year’s whopping deficit.

Even so, the Democrats are deriding even this piddling cut as “extreme,” “radical,” “draconian,” and completely out of the question. And that is what the looming government shutdown is all about.

It is clear that no matter which party “wins” this particular skirmish, we, the taxpayers, will lose, to the tune of over $1.3 trillion in deficit spending this year alone. That represents a gigantic container filled with red ink — to be poured into the already-colossal $14 trillion vat of red ink that represents our total national debt — which, in turn, will be dumped into the inconceivably enormous $100-trillion-plus sea of red ink that constitutes the total future unfunded liabilities of the federal government.

So, let me end with another question:

Who, exactly, are the “extremists” and “radicals” here: those who wish to stop this madness, or those who are determined for it to continue?

The reality is that many lawmakers want to “stabilize the debt” by increasing the debt ceiling.  Of course, you can’t stabilize trillions of dollars.  So essentially, the government ends up selling more bonds just to pay interest on the national debt and pay for new spending.  What’s a few more hundred billion when you already owe several trillion?

Often, to explain how we must increase the debt ceiling, government plays on one major fear – the fear of U.S. default.  Those in support of raising the debt ceiling argue that if it’s not increased the government will not be able to meet obligations.  They essentially say the country will go bankrupt.  To prevent this very issue, the debt ceiling has been raised 74 times since March 1963.  The problem with this rationale is that it’s like urging a boat to take on more water to keep it from sinking.  Imagine meeting with your financial planner and hearing him say, “In these tough financial times I recommend you add to your debt in order to stay solvent.”  I hope you would quickly find a new financial planner.

In the realm of “real world” spending, consumers cannot increase their total debt with a simple declaration.  As consumers approach a high level of debt, their ability to take on more debt is checked by the price (interest rates) and the risk premium they represent to a possible lender.  Obviously, no mechanism of natural market discipline exists for government.  So instead, the debt ceiling becomes an artificial barrier which is put in place to demonstrate the illusion of fiscal responsibility. Opponents of raising the debt ceiling agree.

When the debt ceiling is reached, it will be the first time we’ve done so without raising the limit.  Though there will be implications, don’t expect a government shutdown.  For one, the treasury will be unable to borrow more money to meet federal government obligations.  Scary? Absolutely, but it might not be a bad thing considering no legislation to date has worked to curb out of control spending.  Congress would likely have to pass legislation mandating that the first checks the government writes each month pay for debt service, which would undoubtedly leave fewer dollars available for all other spending.  (In a dream world this repercussion would lead government to tighten their belts and make cost effective saving measures).  What is certain is that a failure to raise the debt ceiling would not result in government default.  Congress has more than enough at its disposal to pay U.S. Treasury bond obligations.  The fear of default is misguided.

In a March 30 Wall Street Journal column, U.S. Senator Marco Rubio wrote that he (and others) will only vote to raise the debt ceiling if it’s the last raise ever made and if its accompanied by several measures to tighten and reign in spending.  With such emphatic promises from political heavyweights like Rubio, you can bet on a hot debate in coming days.

At issue is a veterans bill that the Senators would like to pass and issue press releases praising themselves for supporting over Congress’ Veterans Day vacation.  Problem is the bill is not paid for and therefore is just another bounced checked to be charged to future generations of Americans who are already inheriting the $12 trillion debt created by Congress’ reckless addiction to borrowing and spending.   In addition to not being paid for, the bill discriminates against many vets who sacrificed for our nation and were injured as a result.

coburn letter –

In the letter, Senator Coburn points out “Our veterans have sacrificed for our nation and now it is time for Congress to make some sacrifices too.  If we expect our brave men and women to put their lives at risk, certainly members of Congress can put their political careers at risk by making tough choices to pay for new spending.”  He further notes “It speaks volumes about the misplaced priorities of the Senate that Congress would increase its own budget by $250 million, earmark billions of dollars in pork projects for campaign contributors, and waste days debating trivial bills like tourism promotion, but not take the time to seriously address the concerns of veterans and taxpayers.”