Tales from the Trail

from David Cay Johnston:

Default and consequences

By David Cay Johnston
The author is a Reuters columnist. The opinions expressed are his own.

If the U.S. government voluntarily defaults, how are you going to get that tax refund? Or get paid for the work your company did for Uncle Sam?

While a last-minute agreement to raise the debt ceiling could still be reached, the risk of default as early as Tuesday is causing jitters in global financial markets and anxiety among people who depend on Social Security to eat.

Without an increase in the debt ceiling, the president is faced with an irresolvable conflict between faithfully executing those laws passed by Congress requiring payments for services and benefits and his inability to borrow more.

As William A. Galston of the Brookings Institution neatly put it: "We would be in uncharted legal territory and uncharted constitutional territory."

Peterson Foundation launches OweNo campaign on U.S. debt

While the ads are humorous, the subject is serious.

Fictional presidential candidate Hugh Jidette (pronounced huge debt) will soon be making a pitch for more U.S. debt held by foreign countries in television ads that willCALIFORNIA-PROTESTS/ be appearing across the country.

The tongue-in-cheek spots are actually trying to drive home to the American public the consequences of failing to tackle huge debt increases facing the United States if lawmakers fail to balance the annual budget and continue to run deficits.

The nation’s debt now stands at $13.7 trillion and will hit the statutory credit limit of $14.3 trillion in the spring. At that point Congress must vote to raise the credit limit to keep the country from going into default.