Paying Debt With More Debt

Guest Post by Jeff Perren

U.S. Debt 1940-2010

The U.S. Government is staring into the maw of its self-made debt crisis. This week, it crosses a Rubicon—or would like to. As Tad de Haven at Cato explains:

The [U.S. Government’s] present debt limit is $14.3 trillion, and total outstanding debt subject to the limit currently stands at just under $14 trillion. Given that policymakers don’t have the will to cut spending immediately in order to keep the debt from hitting the limit, a political battle over raising it is unfolding.
    The Obama administration is basically warning that congressional (i.e., Republican) intransigence over raising the limit could potentially lead to the federal government defaulting on its debt, because it needs to borrow money in order to make its debt payments…

Borrowing money in order to make its debt payments. Once again we see that something the U.S. Federal Government does routinely, if practiced by a private individual (Bernie Madoff, say), would be seen as financial suicide.

The Feds get away with it, of course. You and I (and Bernie) don't, of course, because unlike the government we can't force others to pay our debts — not without going to jail, that is.

Say, that gives me an idea...