On the issue of the whether to raise the debt ceiling—allowing the government to borrow and spend even more money—President Barack Obama has resorted to dire predictions about what could happen if Congress does not take action. The Hill reports:"If investors around the world thought that the full faith and credit of the United States was not being backed up, if they thought that we might renege on our IOUs, it could unravel the entire financial system,” Obama said at a town hall meeting hosted by CBS last week but released Sunday.“We could have a worse recession than we already had, a worse financial crisis than we already had.”
And, likewise, U.S. Treasury Secretary Timothy Geithner warned that if Congress does not raise the debt limit, the U.S. economy would likely enter a “double-dip recession” and added, “A default would inflict catastrophic, far-reaching damage on our nation’s economy, significantly reducing growth, and increasing unemployment.”
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Heritage Foundation Vice President of Domestic and Economic Policy David S. Addington notes that those dire predictions just aren’t true. In discussing J.D. Foster’s paper “Congress Has Time and Options on Debt Limit,” Addington writes: "As Dr. Foster’s paper demonstrated, there will not be a default on the Federal debt when the Treasury reaches the statutory limit on its borrowing of $14.294 trillion. The Treasury just will not be able to borrow any more money. The Treasury would still pay debts that come due, putting off temporarily payment of less important obligations as necessary to pay the maturing debt.
President Obama’s prophecies about the debt limit obscure an underlying truth: The U.S. government must find a way to get control of spending.
