A commenter on my previous post
provides a link to an article
that purports to justify the claim that hitting the debt limit might well lead to a default on interest payments on the debt. The arguments are:
1. "we don't know if the Treasury can legally or logistically prioritize payments." Because ... "presidents are legally required to carry out all of the spending that Congress authorizes"
A President cannot spend money he does not have; whatever the requirements, if the debt limit prevents borrowing he will have to reduce expenditure to revenue. Further, the author concedes that the only legal opinion on the subject, from the Government Accounting Office some time back, is that the President can indeed prioritize debt.
And, finally, Congress is always free to change its mind about what it authorizes. The Republican majority in the House would gladly pass a bill prioritizing interest payments, so unless the President and his party want to default there is no need to do so.
2. "the Treasury's payment systems are a bit convoluted." Hence even if the money is there, the treasury might be too disorganized to pay it out.
The treasury has been paying out interest to claimants for quite a long time now, and it is hard to see why the need to cut other expenditures would keep them from continuing to do so. The author cites a problem back in 1979 when the result of a similar situation was that "we temporarily defaulted on some of our debt." It does not seem to have occurred to him that if that particular glitch in payments did not cause the sky to fall, there is no reason to suppose that, if it somehow happened again, this time the result would be catastrophe.
3. "payments and revenues are lumpy. ... So the question is whether there could ever be a particular day when we owe more in interest than we have in cash on hand."
That might be a serious argument if average daily revenue was only a little higher than average interest, but with revenue more than ten times net interest it is hard to take it seriously. The author supports his argument by pointing out that, on November 15th, 30 billion dollars of interest comes due. It apparently does not occur to him that if the government, knowing that that bill is coming due, simply spends a billion dollars a day less than it takes in for the previous thirty days, it will have a cushion adequate to deal with that particular lump. It should not be hard given that, according to his graph, there is only one other day in that month on which any interest is due.
Readers are invited to read the Atlantic article and see if they agree with me that it is evidence for my position. If those are the best arguments that can be produced for the claim that hitting the debt limit is likely to lead to default, the claim is indefensible and the people responsible are making a deliberate attempt to mislead the public.
And the author has the gall to claim that the belief of Republicans that hitting the debt limit will not lead to default show them to be the party of crazy ideas.