by Michael Maharrey, Schiff Gold:
The fake debt ceiling fight is on and the Biden administration has ratcheted up the scare tactics. One of its strategies is to make you think the world will collapse if the US defaults on its debt obligations. After all, the US always pays its bills on time — so we’re told.
A default would certainly be problematic. But despite what you’re being told, it’s not unprecedented. The US government has defaulted before.
I call this a fake debt ceiling fight because we all know how it will end. Congress will raise the debt ceiling. It may or may not come with some modest spending cuts. But we all know that any cuts will be superficial. Actual spending will keep going up. It always does.
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But right now, we have to endure the dog and pony show as Republicans and Democrats haggle.
Republicans say they want spending cuts. (One has to wonder where this urgency was when the GOP controlled both houses of Congress and the White House, but that’s a discussion for another time.) Democrats say they won’t negotiate.
And here we are.
To fortify their position, the administration tells us that raising the debt ceiling is a matter of economic life and death. As I mentioned, the mantra is the US always pays its bills on time. As Mises Institute senior editor Ryan McMaken pointed out, as part of the strategy, Treasury Secretary Janet Yellen is parroting the oft-repeated claim that the US has never defaulted.
America has paid all of its bills on time since 1789, and not doing so would produce an economic and financial catastrophe. Every responsible member of Congress must agree to raise the debt ceiling. It’s something that simply can’t be negotiable. pic.twitter.com/bQeclv7Bba
— Secretary Janet Yellen (@SecYellen) February 6, 2023
This sounds compelling. We all want our government to keep its word, right?
Of course, it doesn’t keep its word and this claim that the US has always paid its bills on time since 1789 is a lie. The US has defaulted more than once. And as McMaken points out, if you expand the idea of default to include inflating away the debt in real terms, default is even more common.