Debt Limit and Common Sense : No Money/Stop Spending

What we do know about the debt is we can afford it! That sounds a little off hand but it true - we don't have the money. It should be simple to figure this out, when you run out of money you stop spending.

If you go to the store to buy food, you always check out the check book account, or you look in your wallet to see if you have enough cash. Or you think back on how much money you have already spent on the credit card and how much you have left before the debt becomes too much to pay. All these things should have an effect on what you buy, no matter what it is.

It a matter of allocation of resources - do I have enough money to buy food and pay the mortgage or rent and still buy a new TV or some new furniture, or maybe I will have to postpone some of these items to make sure I can cover the obligations I have already signed on to.

Is this any different then what our government has to do to make ends meet? We all do it, for the most part, why not the feds? Why is this a problem? It's only common sense, right?

Five Facts about the Debt Limit
Source: Nick Gillespie, "Five Uncomfortable Facts about the Wonderful, Horrible Debt-Limit Debate," Reason Magazine, July 8, 2011.

It's all debt limit, all the time, it seems. Everyone's talking about what may or may not happen when the U.S. government finally butts up against its legal borrowing limit on August 2. That's the date that Treasury Secretary Timothy Geithner says the feds will max out the credit lines that account for about 40 percent of all current spending, says Nick Gillespie, editor in chief of Reason.tv and Reason.com.


While the debt limit is important, it really represents the pretext of a battle over spending and revenue between Republicans and Democrats, with each side waving away the other's claims. Stuck in the middle are the American people. To help clarify the discussion, Gillespie provides five facts about the debt-limit discourse worth keeping in mind.

August 2 is an arbitrary date.

Reaching the debt limit is not the same as defaulting on the federal debt.

Both sides are using the August 2 deadline to negotiate terms; the plain fact is that both sides are trying to get something out of the current moment. This is no way to run a country.

A February 2011 Government Accountability Office (GAO) report on the debt limit has sparked a lot scrutiny because it found that in some (though not all) recent cases where debt-issuance auctions were delayed, markets responded by increasing the government's borrowing costs. The real takeaway, however, is that procedural changes adopted from other countries might help to actually link spending to its effect on national debt.

This is no way to run a country, part two.

The debt-limit debate has to be properly understood in its larger context of a country whose spending has effectively run amok for at least the past 10 years, during which time federal spending has increased by over 60 percent in inflation-adjusted dollars.