The US will not default in October: Even if Congress does not increase the debt ceiling next month

Politicians are making the claim that if the United States Congress does not increase the debt ceiling next month the United States will default on its credit payments. This is not true. It will not happen unless the people in charge want it to. This is not hard to understand, and I will explain.

Estimated US tax revenue for fiscal year 2021 is 3.863 trillion dollars. That amounts to a little over 321 billion dollar per month.

In fiscal year 2020 the government spent 6.55 trillion dollars.

These are the 10 biggest expenditures by category.

Even when the debt limit is reached the government continues to collect tax revenue and will take in around 321 billion in October (3.863 trillion divided by 12 months). You have heard that Social Security checks will not go out. Social Security costs 91.7 billion a month and could be paid and that would still leave another 223.9 billion to spend.

You will hear the military will not get their checks. Monthly spending on National Defense is 63.5 billion dollars. You can fund that as well as Social Security and still have 160.4 billion to spend.

You will hear the politicians say Medicare will not be funded. Monthly Medicare expenditures are 64.7 billion. After funding Medicare, Defense, and Social Security, you’d still have 95.7 billion left.

But here’s the one they scare you with. The government will default on its debt. Net interest from debt runs 28.7 billion. You could fund Social Security, Defense, Medicare, and pay interest on the debt and have money left over. So, the people who say the US will default on its debt are either ignorant or lying to you. I’ll let you be the judge. And don’t get stuck in the numbers.

Is this for real? I had heard that the plan is to deposit the $1 trillion coin into the federal reserve bank, if I recall correctly? Then suddenly the federal government has an extra trillion to spend.

If they really do this trillion dollar coin, it won’t be the last time that happens. I expect they will regularly deposit these trillion dollar coins, and continue to create money out of thin air. If they go down that road, what would ever stop them from doing it over and over?

The Constitution does not permit the federal government to put any - ANY - expenditures above paying what must be paid on/for any federal debt. That debt is the ONLY thing mandated by the Constitution as MUST be paid. The rest, all the rest, collectively, has to take second place to payments on the debt. So those payments must be paid first, and then the treasury has to determine, in consultation with department heads and the President, the priorities of what else will be paid and what payments will have to be deferred. But the federal government cannot simply by choice default, it has to give up other expenses and only if it gave up all other expenses and could not make debt payments, then it would finally have no choice but to default.

Obama claimed in an interview that “the scariest night of his life” was when the debt ceiling debate reached a head in 2011. He admitted that Treasury had a plan to mint the $1 Trillion coin and it was discussed among his Cabinet as a viable option.

10 years later, and 2-3 debt ceiling debates later, I have no doubt that this idea has been further discussed and refined, which makes it less novel to politicians and bureaucrats, less “scary,” and more likely.

“Is this for real?”

New $10,000 copper coins would be more suited for federal debt payoff. If I hold $10,000 in federal debt, I can’t make change for a $1 trillion coin.

The federal debt is simply too large to be paid with honest money.

US billionaires are worth about $5 trillion all together.

The US national debt is around $28 trillion.

The article presents numbers, most of them wrong, and finishes with a sentence that says don’t get bogged down in the numbers.

Medicaid was left out. Roughly 1/6th of all Medicare recipients are also forced onto Medicaid because their SS is too low to fund Medigap (often $4K/yr). Adds to about $50 Billion.

Medicaid also funds medical for those disabled, and SSI is their tiny income. Are there fakes? Probably. Are there some not faking? Also probably. Let’s assume they are already in the SS number and just care about their medical. Call it 30% of Medicaid. So $120 B.

There is about $300B of virus recovery money still unspent. Who here went out and got clippers to avoid the barbershop? Who is paying the barbers?

And underlying all this, the Fed has announced quietly that they already have a plan for function if the debt ceiling is not raised. They will buy defaulted bonds and sell undefaulted bonds, but they don’t really have to do any selling because they can create money and buy any bonds they want. THEY ALREADY DO THIS. SINCE BERNANKE IN 2009.

You know what would happen if the Fed did this? Nothing. All central banks all over the world would do the same so there was no systemic risk globally.

Does this make money pointless and meaningless? You decide. It’s a very hard decision, but there is the reality. Go read up on what Quantitative Ease is. It’s a hard read, but try.

Government shutdown? In our dreams. The idiotic concept of a “debt limit” that is established just to be subsequently ignored later, is the kind of blatant deception and foolishness we no longer need.

Somehow, some judge will be shopped, and he will declare the debt limit null and void, which is absurd in itself. Either that or Biden will just continue his practice of totalitarian dictatorial rule, and tell us how it will all be. That is if he can put a coherent sentence together. I’d say odds are 10 to 1 against.

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