In an interview last Wednesday on CNBC, President Obama said, “When you have a situation in which a faction is willing to default on U.S. obligations, then we are in trouble.”
While he is speaking of House Republicans, the only faction that actually fits that description is the administration itself.
In a speech in Maryland later that day, Obama pressed the default issue again: “As reckless as a government shutdown is, as many people as are being hurt by a government shutdown, an economic shutdown that results from default would be dramatically worse.”
Default means the inability of the U.S. government to service its debt, to make principal and interest payments on outstanding bills, notes, and bonds (the difference among those being their time to maturity). This is not to be confused with payments due to others, whether contractors, vendors, or recipients of entitlement programs, each of whom would have a serious issue were cash flow to cease but none of which is the same as a true national default.
Treasury Secretary Jack Lew released a report on Thursday raising the scare-mongering to a new level. The first paragraph of the report is worth quoting in its entirety:
The United States has never defaulted on its obligations, and the U. S. dollar and Treasury securities are at the center of the international financial system. A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.
In a Fox Business interview on Thursday, Lew discussed the 2011 government shutdown and debt limit debate: “Last time we saw market reaction to the threat of default — we never actually crossed the line. No one knows with certainty how bad the consequences are if we cross the line.”
And on Sunday, Lew lied about the administration’s ability to make sure default does not happen if the debt limit is reached.
Please read the entirety of my article for the American Spectator at:
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