Why is there a National Debt Ceiling?
Posted: Thu Jan 06, 2011 6:20 pm
I've been reading about the resistance to raising the National Debt Ceiling and logically the entire idea of a ceiling is a bit puzzling. Of course, I understand why there needs to be restraint in terms of borrowing, but Geithner is predicting a national catastrophe if the Debt Ceiling isn't raised by March 31st. He implies that the Treasury would have to default on its obligations if the debt ceiling isn't raised.
And earlier in the week, White House economic advisor Austan Goolsbee said, "If we hit the debt ceiling, that's ... essentially defaulting on our obligations, which is totally unprecedented in American history," he said. "The impact on the economy would be catastrophic...I don't see why anybody's talking about playing chicken with the debt ceiling," Goolsbee said. "If we get to the point where you've damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity."
I was under the impression that Treasury Bonds had virtually no credit risk. Yet, suddenly the Treasury would have to default on its obligations because the votes aren't there in Congress? If the entire economy and full faith and credit of the US Government depends on the House of Representatives voting to raise the debt ceiling, why do we even have a debt ceiling if we have to get Congress to raise it to survive?
And earlier in the week, White House economic advisor Austan Goolsbee said, "If we hit the debt ceiling, that's ... essentially defaulting on our obligations, which is totally unprecedented in American history," he said. "The impact on the economy would be catastrophic...I don't see why anybody's talking about playing chicken with the debt ceiling," Goolsbee said. "If we get to the point where you've damaged the full faith and credit of the United States, that would be the first default in history caused purely by insanity."
I was under the impression that Treasury Bonds had virtually no credit risk. Yet, suddenly the Treasury would have to default on its obligations because the votes aren't there in Congress? If the entire economy and full faith and credit of the US Government depends on the House of Representatives voting to raise the debt ceiling, why do we even have a debt ceiling if we have to get Congress to raise it to survive?