In the debt ceiling talks, President Obama and Republican leaders are locked in a battle of will. The simple truth is higher taxes are not needed, and the U.S. does not have to default if no deal is struck by August 2.
The U.S. government will still be collecting taxes equaling about 55 percent of expenses-and interest on the debt could easily be paid; social security and Medicare checks could go out, and the military adequately funded. Other functions would have to be greatly scaled back. This has been endured before and is not pretty, but make no mistake about it, we have plenty of money on hand to pay $18 billion each month in interest on the debt. With a sound plan to manage the crisis, bonds coming due could be rolled over.
Secretary Geithner, whose primary skills are bureaucratic and not economic, appears intent on forcing a crisis rather than making plans to keep the country going. That would likely include phasing down some operations the last weeks of July as the early August deadline draws closer.
That would take away the President and Democratic leaders club in the debt-ceiling negotiations, and their strategy to continually paint Republicans as spendthrifts.
Sadly, the Republicans as inept as ever, don’t have the sense to debunk Democratic rhetoric with hard facts.