‘Without which the United States will default’

I happened to tune in a news broadcast on National Public Radio as I was driving home last week.

The newscaster said President Barack Obama still holds out hope for a deal to raise the national debt ceiling by Aug. 2, without which the United States will default on its debt.

One of the problems with electronic news is that you can't go back to re-parse a sentence like that, to determine whether some part of it was in quotation marks. That is to say, it could be that our newscaster was attributing to Mr. Obama the assertion that a failure to raise the debt ceiling would cause a default, rather than stating that as a fact known to NPR.

What it sounded like, however, was that NPR was reporting a failure to raise the debt ceiling would cause a default.

Which it wouldn't.

(Nor is there any reason to believe the federal government would be unable to send out checks to Social Security beneficiaries as of Aug. 3, under the current debt ceiling, though the White House added that trumped-up scare tactic later in the week -- despite the fact Senate Majority Leader Harry Reid, D-Nev., keep insisting there's enough salted away in the "trust fund" to last 20 years.)

This impression was amplified by the same newscaster also reporting -- apparently as established fact -- the counterintuitive claim that Mr. Obama actually seeks deeper spending cuts than the Republicans seek.

In fact, neither party intends to cut spending in 2011, or 2012, or 2013. Instead, the current potlatch measures which side will promise deeper "cuts" to take effect in eight or 10 years. In the political world, this is the equivalent of promising to cut spending sometime after the Martians land, or when continental drift creates a land bridge between Honolulu and Tokyo, whichever comes first.

This, they believe, allows them to claim that a deal which will actually bankrupt the government in only a few more years is in fact a clever plan to reduce deficits and the debt by somehow binding our grandchildren not yet born to cut spending someday.

And, in fact, it appears they can get away with this, so long as people are willing to believe the "news" as reported by outfits such as NPR.

How many times do we have to go over this?

First, of course both parties will agree to raise the debt ceiling. Democrats will either cheer that Republican have caved in and agreed to tax hikes on the greedy rich or else fume that inflexible, doctrinaire GOP plutocrats prefer to have small children run over by road graders, while Republicans will insist they've won promises of massive spending cuts, or possibly a handful of magic beans, along with a minor-league infielder to be named later.

Why? Because Republican politicians enjoy spending borrowed money to buy votes almost as much as Democrats do.

What's going on now is merely a bunch of posturing, the most delicious absurdity being this threat from Mr. Obama that there won't be any deal unless Republicans agree to raise taxes, allowing Democrats to call them hypocrites in the fall of 2012.

The correct response -- if Washington's Republicans had the slightest intention of reducing spending -- would be: "Fine. We're going on vacation till Sept. 6. There won't be any more tax hikes. There won't be any deal. The debt ceiling stands as it is, and because you guys have continued borrowing like speed freaks, as of next fall the amount of money available for the federal government to spend will be about 60 percent of what it is today. Call it 'a good start.' "

Why on earth would anyone who wants to cut spending agree to raise the debt ceiling, which can have no other purpose or effect than to facilitate higher borrowing and spending -- especially when $600 billion in new taxes are already included in ObamaCare?

As of June 29, the total public debt of the United States stood at $14.46 trillion -- approximately 98.6 percent of calendar year 2010's annual gross domestic product. An additional $45.8 trillion in unfunded obligations for Medicare, Medicaid and Social Security are not counted. Back in 2001, this debt was $5.7 trillion. Did we not have enough government in 2001?

This debt was one of the reasons listed by Standard & Poor's when it downgraded the United States' credit outlook to "negative" on April 18. The current debt ceiling of $14.294 trillion was signed into law on Feb. 12, 2010. Why did they make it a law if they didn't intend to abide by it? Why should Congress change the law just because Mr. Obama and Sen. Reid want to break it?

As for the inevitability of default: Of course the U.S. government is likely to cheat investors of their returns in the long run. (You thought people ran for Congress because the waiting list was too long at the nearest monastery?) The preferred method, however, is to print so much fiat money that lenders get paid off in dollars worth far less than they expected.

All that aside, however, if Congress were to refuse to raise the debt ceiling (which is precisely what they ought to do), why would there be any need for the Treasury to immediately "default" by refusing to pay interest on outstanding bonds?

Treasury Secretary Timothy Geithner confirmed the other day that the United States government now borrows 40 cents of every dollar it spends. So, if it had to stop borrowing as of Aug. 2, federal spending would have to be trimmed by something approaching 40 percent, which means Washington could spend at the same level it spent in 2005 (or 2003, if you want to correct for inflation).

At that point, Washington would have to allocate 16 percent of current revenues to keep current on its outstanding debt.

That's a lot. But plenty of American breadwinners currently spend 32 percent of their take-home pay to keep current on a home mortgage. You don't hear most American wage-earners fuming, "If no one will loan me half again what I earn every month, I'm going to default on my mortgage!"

Finally, if you will review the 14th Amendment, you will find it states "The validity of the public debt of the United States, authorized by law ... shall not be questioned."

In fact, this is merely a preamble to Section 4, in which the 1868 authors mainly meant to declare they would not be paying the debts of the late secessionist Confederacy, nor reimbursing any Southern plantation owner for the value of slaves recently emancipated by executive fiat. It was inserted to indicate the United States government still, however, intended to pay its own war debts, which it subsequently did, through a direct tax, capitated.

Furthermore, I strongly doubt there has ever been enacted any "enabling legislation" making it a federal crime with any defined punishment to "question the validity of the public debt" (thank goodness).

Nonetheless, isn't that what Barack Obama (and possibly my friendly NPR newscaster) just did, by stating -- incorrectly -- that if the debt ceiling is not raised, the United States then must and shall, as a direct result, immediately stop making payments on its current debt, and possibly even stop sending out Social Security checks? That it shall, in other words, "default"?

And what an incentive for foreign buyers of U.S. Ponzi Scheme ... er, Treasury bonds that assertion must be.

Vin Suprynowicz is assistant editorial page editor of the Review-Journal, and author of the novel "The Black Arrow" and "Send in the Waco Killers." See www.vinsuprynowicz.com.