True enough, but that isn’t the real risk here — though the ceiling will have to be raised eventually. The feds have plenty of dough to pay bondholders and run auctions to roll over maturing debt. In 2013, according to the Congressional Budget Office, the net interest expense of the US government will be approximately $218 billion, while revenue will be nearly $3 trillion.
See, this is what “wiser heads” are counting on, and why such folks don a faintly bemused, even condescending expression at any forecasts of financial doom emanating from us fiscal conservative wingnuts. Because these people are bean counters, and so they think the economic universe is comprised solely of beans.
Unfortunately, the U.S. dollar is not backed by beans. It is, officially, backed by nothing more than this:
Nothing backs the dollar but the promise (cross our fingers and hope to die) of the United States to back the dollar.
Not even beans. Just promises.
Faith, in other words.
And faith is what other people have to have, in order for that promise to have any effective meaning in the real world.
Yes, we have massive wealth, not to mention other tangibles like the most powerful military in history, and a (relatively) low-corruption financial environment. All of which are reasons that the rest of the world (mostly) retains its faith in our promises. But….
See, the real debt ceiling is the one eventually imposed by global financial markets at some point on a profligate Washington. When that happens, Congress won’t be able to raise the ceiling even if it wants to. The only options then to avoid a financial crisis will be draconian austerity — both massive tax hikes and brutal entitlement cuts.
In other words, absent faith, we risk turning into Russia – still a military titan, still with enormous natural wealth, but living like dogs in cardboard boxes because the faith we once held because we earned it has moved on to some other brightly colored bits of paper.