In an otherwise good post on why acrimony in Washington will only get worse in 2013, BuzzFeed‘s John Stanton writes:
Congress and the administration will be grappling with an even more profound and potentially disastrous crisis — the nation’s debt limit. Although Republicans have sought to cast the issue as a demand from Obama that Congress grant him a blank check, it is far more complicated. The debt limit is in reality the government of the United States simply making good on its promise to pay back the debts Congress and two successive administrations have rung up over a dozen years.
A default on the debt would, economists have warned, send the nation and the world into economic chaos and could set off a new Great Depression.
This is simply false. The debt limit is not “the United States simply making good on its promise to pay back the debts Congress and two successive administrations.” That is a White House talking point, not a fact. In reality, the debt limit is simply a legal authorization bestowed by Congress to the Secretary of the Treasury to issue new debt.
Article I, Section 8 of the Constitution, very clear grants Congress, not the Executive Branch, the exclusive power “to borrow money on the credit of the United States.” Congress then transfers that power to the Executive Branch through specific authorizations to issue new debt. The Congressional Research Service reports: “Congress has always placed restrictions on federal debt. The form of debt restrictions, structured as amendments to the Second Liberty Bond Act of 1917, evolved into a general debt limit in 1939.” In 1940, the United States had about $43 billion in outstanding debt. Today it is over $16 trillion.
Section 4 of the 14th Amendment does obligate Treasury Secretary Tim Geithner to always honor “the public debt of the United States,” but not all government spending promises are “public debt.” Just ask Ephram Nestor.
The interest and principal payments due on existing Treasury securities, however, absolutely are part of the public debt. But, unless Geithner chooses to do so, there is no danger that these payments will not be made. As the Bipartisan Policy Center noted in 2011, the federal government takes in far more than enough tax revenue every month to meet existing public debt obligations. It even takes in enough to to pay: all interest on Treasury securities (thus avoiding default), all Social Security obligations, all Medicare and Medicaid obligations, all Defense contractor bills, all Veterans payments, and all active duty troops, and still have almost $7 billion left over for other items.
None of this means that reaching the debt limit would not have serious consequences. The Bipartisan Policy Center estimates that federal spending would have to be cut by 44 percent a month if the debt limit wasn’t raised.
That said, “a default on the debt,” is not one of those consequences.