In 2011, President Obama talked often and dramatically about the risk of default if America hit the debt ceiling. Now he’s doing it again, using the same factually inaccurate claims:
“As reckless as a government shutdown is … an economic shutdown that results from default would be dramatically worse,” Obama said on the morning of the third day of the government shutdown, at an event held at M. Luis Construction Company in the D.C. suburb of Rockville, Md.
This time his fact-twisting targets senior citizens:
“In a government shutdown, Social Security checks still go out on time. In an economic shutdown, if we don’t raise the debt ceiling, they don’t go out on time,” he said. “In a government shutdown, disability benefits still arrive on time. In an economic shutdown, they don’t.
“In a government shutdown, millions of Americans — not just federal workers — everybody faces real economic hardship. In an economic shutdown, falling pensions and home values, and rising interest rates on things like mortgages and student loans, all those things risk putting us back into a bad recession, which will affect this company and those workers and all of you,” he said.
Fortunately, the President wasn’t the only national politician talking about the debt ceiling this week. Senator Rand Paul (R-KY) spelled out the real facts about so-called “default”:
“What’s going on is, interestingly, the Democrats are scaring people saying we might not pay [interest on the debt] because Republicans don’t want to raise the debt ceiling,” Paul said on CNN. “If you don’t raise the debt ceiling that means you won’t have a balanced budget, it doesn’t mean you wouldn’t pay your bills.”
Paul argued that the House has passed a bill, the Full Faith and Credit law, that mandates payments on debt interest, Social Security, Medicare and soldier’s salaries go out first. He said that if the debt ceiling is breached, other government function wouldn’t get financed, but that no default would occur.
Senator Paul is exactly correct. “Default” would only happen if the President’s Treasury Department made it so by not paying interest payments. Hitting the debt ceiling is like maxing out your credit cards, while defaulting is more like not making payments on your card at all.
Regarding Social Security checks and disability payments, the federal government would also be able to afford them. Hitting the debt ceiling would force a balanced budget, not a default – and in 2014, the federal government is expected to be able to cover about 85% of its outflows with tax revenues. This would allow interest payments, Social Security, Medicare, defense, and disability to be funded, with room to spare.
Is hitting the debt ceiling ideal? No, of course not, which is why Tea Party Patriots has long demanded Congress be responsible and balance the budget instead of raising the ceiling. But it’s also not something that will cause a default.