Government's default


Steve Halloran is wrong about the default of our government (Voice of the People, Oct. 15).

Yes, in the corporate word “default” is generally measured by the inability to pay debt interest since legally the corporation must meet payroll costs and other legal obligations before interest payments on debt.

Thus, for a corporation the inability to meet debt obligations is generally the trigger that forces default or bankruptcy. But for a government everything it pays is paid because of laws passed by Congress. Thus, for a government, any payment required by law that is not paid is a “default.”

The government will likely pay (as long as it can) Social Security and Medicare and payroll costs of the military and other “essential” government payments. But the cash flow will not cover all payments required by laws passed by Congress.

Decisions will have to be made to not pay some bills required by law. That non-payment of legally required obligations is a “default” and makes us a deadbeat nation.

That default on any legal (congressionally passed) obligation will have huge impact on the credit standing of the United States by rating agencies and by the holders of our debt.

The consequences of that will be increased borrowing costs on future debt. That cost will be the fault of the Tea Party crazies in our Congress who, when they can’t get their way under the Constitution, will cause self-inflicted harm to the full faith and credit of the United States in order to get their way. That, to me, is close to treason.

By the way, for those of us who can do arithmetic, it is clear that our deficit and our borrowing is directly the result of reckless tax cuts by President George W. Bush that were not matched by spending cuts and by two wars.

Bert Peterson
Hastings



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