“Failure to raise the debt limit would force the United States to default,” Treasury Secretary Timothy F. Geithner panted in a May 13 letter to Sen. Michael F. Bennet, Colorado Democrat. “A default would inflict catastrophic, far reaching damage on our nation’s economy, significantly reducing growth, and increasing unemployment.”
Mr. Geithner’s hyperventilation ignores the experiences of millions of Americans who have refused Visa’s and MasterCard’s offers to boost their credit ceilings. Ignoring one’s bills can trigger default; leaving one’s borrowing threshold intact does not. Keeping credit lines unchanged is a first step toward spurning further debt. Responsible cardholders will eat at home more often and, perhaps, shop at Joseph A. Bank rather than Hugo Boss. The resulting savings then go straight to debt reduction.
“It’s not accurate at all to equate a failure to raise the debt limit with a default on our Treasury obligations,” Sen. Patrick J. Toomey, Pennsylvania Republican, tells me. “That’s totally false. Tax revenues will be nearly 10 times the amount of money needed to avoid defaulting on our debt.”
Indeed, the Congressional Budget Office (CBO) forecasts $2.23 trillion in federal tax revenues for fiscal 2011 and net interest expenses of $213 billion. Mr. Geithner will have plenty to pay bondholders.