7 myths about the debt ceiling…

Published Date Author: , August 5th, 2011

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Obama: “… the sky is falling!!! We are all going to DIE!!!”

The problem is we have a president with the mentality of a 5 year old. “Waaaaa… I’m going to take my ball and go home”

He cannot tell the truth and expect to get his way when what he wants is contrary to the wishes of the American people. So he and his fellow democrats use scare tactics and lies.

Yes… the following is from Fox News however what is cited happens to be the truth and the law.

Seven Myths About the Looming Debt-Ceiling ‘Disaster’

By John Lott Published July 15, 2011 | FoxNews.com If Congress and the president don’t raise the debt ceiling, the consequences will be disastrous, politicians and pundits tell us, — the equivalent of an economic Armageddon. And President Obama warns that the consequences are so dire that he cannot possibly tolerate any delay in making an agreement. According to Treasury Secretary Timothy F. Geithner, failure to raise the debt ceiling limit will cause the United States to default and “cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover.” On Thursday, he renewed these warnings. And President Obama alarmed retired Americans this week: “I cannot guarantee that those [Social Security] checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.” And the list of terrible things to come, if the government is stopped from continued deficit spending, goes on.

According to Obama, Americans just don’t understand the complexities of the situation. But the general public is right. There is an overload of doomsday predictions. And earlier this year, before the debt limit was hit on May 21, the Obama administration already used the same scare tactics.

Here’s a look at seven myths that the Obama administration is pushing on the American people: 1) Not increasing the debt ceiling means the U.S. government will default on its debt. This is probably the biggest lie that most other claims arise from. Default occurs if the government stops paying interest on the money that it owes. Not increasing the debt ceiling only means that the government can’t borrow more money and that spending is limited to the revenue the government brings in. And, with interest payments on the debt making up less than a ninth of revenue, there is no reason for any risk of insolvency. Time after time, congress and the president have failed to agree on a debt ceiling increase and still there has been no default. Examples include: December 1973, March 1979, November 1983, December 1985, August 1987, November 1995, December 1995 to January 1996, and September 2007. Indeed, this really shouldn’t even be a point of debate. The 14th Amendment to the Constitution requires that the debt payments come first before any other spending.

2) Until the debt ceiling is raised, uncertainty over the payment of U.S. debts will create chaos in financial markets. Given that the Constitution mandates U.S. debts be paid before any other spending and that sufficient money will be available to cover our interest payments, the only uncertainty arises from Obama’s actions. Will he try not to pay the interest? Even a delay of a day in paying this interest will create a default. Court action could eventually force Obama to follow the Constitution but a default would have already occurred. There is a simple way to end this uncertainty: have the president declare now that he will indeed follow the Constitution and make those payments. Failure to increase the debt ceiling clearly doesn’t mean default. During one three week period at the end of 1996 and the beginning of 1997, some of the government shut down when a similar battle over the debt ceiling occurred, but there was no default. President Clinton used the revenues that were coming in to pay the interest on the debt.

3) Obama claims he doesn’t know if there is money to send off Social Security checks on August 3. The president knows very well how much revenue will be available to send out checks on August 3. Indeed, enough money will be available to not only pay the interest, but to also cover all Social Security, Medicare, Medicaid and children’s health insurance, defense, federal law enforcement and immigration, all veterans benefits, Response to natural disasters. Terrifying elderly people who are dependent on their Social Security checks may make good politics, but it is unconscionable. Yet, these scare tactics aren’t really very surprising. The Democrats behaved no differently when they ran television ads bizarrely depicting Rep. Paul Ryan (R-Wis.) as pushing an old lady in a wheel chair off a cliff.

4) Mortgage interest rates will rise dramatically if the debt ceiling isn’t increased. Not true. Indeed, the opposite is more likely, for not raising the debt ceiling stops the government borrowing more money. Less borrowing by the government could lower mortgage rates as there would be more lending available for potential homeowners. The interest rate paid by the government might actually go down for a second reason: just as banks charge individuals a lower interest rate for those who have less debt compared to their incomes, the same is true for governments.

5) Time is Running Out on Debt Deal, so it must be done immediately. Despite Obama’s insistence that a deal be completed by July 15 and Geithner’s claim that a deal had to be reached by July 22, there have been many times over the last few decades where negotiations have extended past when the debt limit had been reached. The longest delay lasted three weeks. Besides claiming that there will be a default, no explanation has been offered for why the debate is any different this time. Clearly, all these claims of urgency are part of some grand strategy to scare people. But that strategy depends on voters not knowing what is necessary for a default to occur.

6) If government spending is cut, there will be a depression. Obama promised that a “temporary” increase in government spending would stimulate the economy, but now he is telling us that we can’t cut that “temporary” increase — that we are stuck with it. It’s included in the new baseline. If Obama’s program — including a 28 percent spending hike since 2008 and more than $4 trillion in deficits — worked so well, why has our unemployment rate risen more than elsewhere? The European Union, Canada, South America, Japan, andAustralia have all had smaller increases in unemployment compared to the U.S. after Obama’s “stimulus.” We have also had these shutdowns before and the numbers don’t show any negative effect on unemployment or GDP .

7) The value of the dollar will plummet. Again, the supposed dollar-collapse occurs when we default. But there won’t be any default. In addition, less government borrowing means lower future taxes, thus making the U.S. a more attractive place to invest. More foreign investment will actually cause the dollar to rise.

It is time for President Obama and his administration to stop scaring people. Cutting government spending back to its 2007 level won’t be the end of the world. After all, during the 2008 presidential campaign, Obama himself repeatedly promised “a net spending cut.”

John R. Lott, Jr. is a FoxNews.com contributor. He is an economist and author of the revised edition of “More Guns, Less Crime” (University of Chicago Press, 2010).


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