On March 16, 2006, when our national debt stood at $8.27 trillion, a young Senator from Illinois announced his intention to vote against raising our nation’s debt ceiling to $9 trillion, explaining:
The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.
That Senator, of course, was Barack Obama. But now that President Obama is the leader, and now that our national debt stands at $14.01 trillion (a more than 70 percent increase from 2006), he is singing a different tune. His Treasury Secretary, Tim Geithner, sent a letter to Congress last week claiming that unless they raised the debt ceiling by “the end of the first quarter of 2011,” the “full faith and credit of the United States” would be “called into question” and there would be “catastrophic damage to the economy.”
This is, of course, completely false. The United States government will not default on its debt. Federal taxes will still be collected by the Treasury, from which interest and principal on the debt should be paid. The creditworthiness of the U.S. is not in danger. Just look at history. In the fall of 1995 the federal government reached its $4.9 trillion debt ceiling. Congress refused to raise it. The world did not end. Instead, Treasury took several measures during the period to raise funds to meet federal obligations without exceeding the debt ceiling. In March 1996, the debt ceiling was raised to $5.5 trillion. Was, as Geithner warns, the “full faith and credit of the United States …. called into question”? No. Was there “catastrophic damage to the economy”? No.