Upon discussing the debt crisis with some conservative friends, I realized that few of them know the difference between the national debt, the budget and the deficit. Like Michelle Bachmann and other Teapublicans, they wrongly believe that refusing to increase the debt ceiling will result in cutting spending and reducing taxes.
Faced with such stupidity, its difficult to know where to begin. But Ill start with some definitions:
Budget – The annual spending plan authorized by Congress based on anticipated revenue and anticipated spending needs. (For Teapublicans, a budget is the money that Congress authorizes the President to spend.)
Deficit – The negative difference between actual spending and actual revenue.
Surplus – Thanks to Bush, we haven’t seen one of these since the Clinton era. But just for the sake of conversation, a surplus is the positive difference between actual revenue and actual spending.
National Debt – The accumulation of deficits from our nations history. It is money that has already been spent.
Debt Ceiling – This is an arbitrary number established by Congress based on paranoia. Since the 1970s, the debt ceiling has been raised more than 70 times; 17 times by Reagan and 7 times by George W. Bush.
Now heres where it gets really difficult. Failing to raise the debt ceiling will cut spending. But only because there will not be enough money to pay our bills. It forces the Secretary of Treasury to decide which bills to pay; money that Congress already agreed to spend. Failing to raise the debt ceiling will effectively cause the US to default on its bills. (For Teapublicans like Bachmann, Cantor and Palin, its as if you went on a spending spree at Walmart and then decided not to pay your credit card company.)
In effect, failure to raise the debt ceiling turns the US into a bunch of deadbeats. Other nations and individuals will not want to invest in our country. Interest rates will rise dramatically. And world stock markets will crash. Indeed, most experts say default will make the Great Recession of 2008 seem like well like a tea party.