Default = failure to meet financial obligations

[erowe1]

It's not surprising to hear Limbaugh and other partisan hacks talking about how the government won't default even if it doesn't raise the debt ceiling.

That's obviously a talking point that somebody in the establishment has put out there, and their minions are faithfully repeating it.

But it's disappointing to see Rand and others on our side getting on that bandwagon, including a lot of people posting here.

The government has made promises to spend $3.8 Trillion. Their revenue is $2.9 Trillion.

How do people figure that they can meet their financial obligations without increasing the size of the debt?

Don't get me wrong, defaulting would be great. It's the only right course of action. But that is what our argument needs to be, that default is a good thing, not that it can somehow be avoided without increasing the debt.

 

[erowe1]

http://dictionary.reference.com/browse/default?s=t

 

[malkusm]

It's not surprising to hear Limbaugh and other partisan hacks talking about how the government won't default even if it doesn't raise the debt ceiling.

That's obviously a talking point that somebody in the establishment has put out there, and their minions are faithfully repeating it.

But it's disappointing to see Rand and others on our side getting on that bandwagon, including a lot of people posting here.

The government has made promises to spend $3.8 Trillion. Their revenue is $2.9 Trillion.

How do people figure that they can meet their financial obligations without increasing the size of the debt?

Don't get me wrong, defaulting would be great. It's the only right course of action. But that is what our argument needs to be, that default is a good thing, not that it can somehow be avoided without increasing the debt.

That's not what is meant by default - default depends upon the ability to service the debt, not the ability to meet all potential obligations of government. Servicing the debt only requires us to make timely interest payments.

Further, as there have been no general appropriations passed by Congress, the $3.8 trillion you cite is actually something less. In order to operate government without raising the debt ceiling, all that would need to happen would be to appropriate no more than is projected in revenue - which is the basis on which nearly all state governments operate.

 

[malkusm]

Think of it another way - if a company takes out a business loan, and then a year later, has only enough revenue to repay the loan OR to pay its employees, would it be defaulting on the loan if it decided to lay off the employees and repay the loan? Clearly this would not be a default in the eyes of the lender.

 

[erowe1]

Right. But the federal government owes money to lots of parties, not just those who have loaned it money. But also everyone else it's made promises to, such as Social Security recipients. If it fails to keep any of those promises, it defaults.

This is why a lot of people reckon the real national debt at around $100 Trillion, because that's what it is when you include all of the unfunded mandates.

 

[erowe1]

Basically, what they're saying is, "No we will not default against this one particular creditor. Sure we'll default against some other creditor, but don't worry, it doesn't have to be that one."

 

[malkusm]

Right. But the federal government owes money to lots of parties, not just those who have loaned it money. But also everyone else it's made promises to, such as Social Security recipients. If it fails to keep any of those promises, it defaults.

But it wouldn't be a default on the debt, which is what people are referring to when they discuss "default." (I don't actually see how it would be a default at all given that most government programs are not expressly guaranteed by any manner of law, and certainly not as some inherent right of the program; but I am willing to concede the point.)

 

[malkusm]

Basically, what they're saying is, "No we will not default against this one particular creditor. Sure we'll default against some other creditor, but don't worry, it doesn't have to be that one."

No one loaned the government money for anything other than the debt itself. (I could only wish that my tax dollars were repaid to me with interest!) It's an entirely different arrangement which doesn't fit the financial definition of "default" in any sense.

 

[erowe1]

http://dictionary.reference.com/browse/debt?s=t

"something that is owed or that one is bound to pay to or perform for another"

If they don't pay money they owe to someone, then they default on some debt.

 

[NorthCarolinaLiberty]

How do people figure that they can meet their financial obligations without increasing the size of the debt?

The only figuring that Zero did was how many phones and laptops he had to give away for his re-election.

 

[erowe1]

Again, default = failure to meet financial obligations.
http://dictionary.reference.com/browse/default?s=t

And where do you get this claim, "most government programs are not expressly guaranteed by any manner of law"?

I'm pretty sure that, at least measured in numbers of dollars allocated, that isn't true.

 

[malkusm]

http://dictionary.reference.com/browse/debt?s=t

"something that is owed or that one is bound to pay to or perform for another"

If they don't pay money they owe to someone, then they default on some debt.

Please explain to me how the government is "bound to pay" for any government program, absent an explicit appropriations bill for the program.

If there is not an appropriations bill, then government hasn't "bound to pay" anything to anyone. I guess you could argue that there is a "social contract" to fund the programs that were created by politicians who were duly elected, but social contract theory is not looked upon too highly here.

 

[erowe1]

Sorry, folks, something's wrong with my comp right now. That's why I'm not using the quote function.

 

[erowe1]

"Please explain to me how the government is "bound to pay" for any government program, absent an explicit appropriations bill for the program."

That's what entitlements are. That's why there's a whole category of spending they call "nondiscretionary."

 

[erowe1]

Previous Congresses and Presidents have passed and signed laws obligating the current Congress and President to fund things.

 

[malkusm]

"Please explain to me how the government is "bound to pay" for any government program, absent an explicit appropriations bill for the program."

That's what entitlements are. That's why there's a whole category of spending they call "nondiscretionary."

Entitlement spending does not exceed federal revenue. If that were true, I can see how we would be "defaulting" on those obligations; it's not.

 

[erowe1]

Here's one explanation of the real debt. You can find lots of examples of people making this same point:
http://online.wsj.com/article/SB10001424127887323353204578127374039087636.html

 

[malkusm]

Previous Congresses and Presidents have passed and signed laws obligating the current Congress and President to fund things.

They've created programs which, you could say, are intended to continue; but nothing obligates the current Congress to fund anything, as the present situation demonstrates.

 

[erowe1]

OK. So you think the government can avoid default without raising the debt ceiling. How? Please show the revised budget where that happens. Has anyone come up with one?

 

[erowe1]

Here. The annual deficit exceeds discretionary spending. It's mathematically impossible to fund all nondiscretionary obligations without increasing the debt.
http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2011.png