Debt Ceiling Dummies

So I ran across this article in the LA Times.  As it’s an opinion piece, I am not looking for everything to be substantiated, but when the author started stating some stupid shit, I had to comment on it.

The author states “Remember, raising the debt ceiling doesn’t drive the country deeper into debt. The amount of borrowing is determined by annual budget, tax and spending bills, as well as the statutes that control benefit programs such as Medicare and Medicaid.”

The first statement is partially true, the second is true – although it’s true in the EXACT same sense as if you were to sign up for cable TV service, and set it up to use your credit card to automatically make the payments.  But then you made interest only payments on the balance of the credit card – you simply charged the cable TV bill to it every month, made the minimum payment, which increases the balance owed (your debt) each and every month.

At some point you’ll hit your credit limit.  It does not matter one iota if you’re contractually obligated to continue the cable TV service for another year.  Your credit limit (the EXACT same thing as the debt ceiling) has been reached.  You cannot make any more payments to the cable company until you:

  1. Make some payments to reduce the balance, so that you are once again under your credit limit.
  2. Negotiate with the credit card company to raise your credit limit.
  3. Switch to another card that’s still under the limit to make the payments.

Note that option 1 requires you to start spending less than you actually take in, because you’re now forced (by the credit limit/debt ceiling) to start paying for things (months of cable TV service) that you didn’t pay for earlier.  It doesn’t matter one bit if you have a contract, you do NOT have the money to pay for it.

We chose option 2 and raised our credit limit.  Absolutely no plan to scale back spending to start spending less than we take in.  Even after the “cuts” (actually just reductions in future increases) annual deficits are projected as far as the eye can see. And each deficit adds to the debt.

In other words, our plan is to keep spending money and ask for another increase in our credit limit.  Brilliant.

gk

 

 

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