Default More Than 400 Years Ago Leaves Scars

This column perpetuates a misleading theme in the debate. The author implies that the U.S. will suffer terrible consequence in the event of a default. This is true, but completely irrelevant: Under no circumstances will the U.S. actually default.

As long as federal revenues are greater than the costs of servicing our debt, we will continue to service it. The government is constitutionally obligated to do so. Rather than default, we will see catastrophic and immediate cuts in services. All of a sudden, the government's monthly outlays will have to fit into monthly revenues. This is the goal of the House Republicans -- "starve the beast." They're comfortable with a failure in negotiations. For them, it's a heads-we-win, tails-you-lose situation.

In any case, while a failure to raise the debt ceiling will send a lot of people home hungry, those people will certainly not be the bondholders.

Amusing read, but the "leaves scars" part is completely unsubstantiated in the text itself, except for a vague allusion in the last paragraph.

For those concerned about the current debt issues, the last two Planet Money podcasts of were fantastic, and rather reassuring:

http://www.npr.org/rss/podcast/podcast_detail.php?siteId=944...