DN Editorial: Fail to raise the debt ceiling and it will cave in

THE MOST important thing to know about raising the debt ceiling is this: The federal budget is not anything like your family budget. Dealing with the federal debt is not the same as cutting up your credit cards and vowing to pay cash going forward.

Many people apparently do not understand this: That's the only explanation for why seven out of 10 say they don't want Congress to raise the "debt ceiling."

Framing the question as if it's about "fiscal responsibility" is heinous fiscal irresponsibility.

Some background: The United States borrows 42 cents of every $1 that Congress has already voted to spend. To get this money, it issues bonds on which it pays interest. But there is a limit - a ceiling - for how much it may borrow. Right now, that's $14.3 trillion.

When the country gets close to that limit, Congress must vote to raise it to keep paying its bills. And it always has: 74 times since 1962, 10 times in the past decade, seven times when George W. Bush was president.

But some conservative members of Congress are threatening yet another political standoff like the one they engineered a few weeks ago, in which they took the government to the brink of a shutdown until President Obama agreed to big cuts to programs for America's most vulnerable citizens.

This is not, repeat not, a debate about the deficit, which entails what should be raised in taxes and spent on government programs in the future. The debt is money we already have obligated ourselves to pay. In fact, the most radical deficit-cutting Republican proposal from Budget Chairman Paul Ryan - which was passed by the House of Representatives a few week ago - would itself require an increase in the debt ceiling.

We're due to hit the borrowing limit on May 16, but the Treasury Department can juggle money to keep the government going for a couple months more, until early July. Once the creative bookkeeping ends, the government can't borrow any more money and won't be able to make payments on interest and/or principal on the debt. That would mean the first U.S. default in history.

If that happens, U.S. government bonds would no longer be the safest possible place to invest. Interest rates would skyrocket. Investors would start dumping our bonds and looking elsewhere to park their money. In fairly short order, government would have to stop paying most of its bills - Social Security and Medicare, military salaries, unemployment insurance, and payments to government contractors and other employees.

But the crisis wouldn't take place in a vacuum: With the "full faith and credit of the United States" in question, global stock markets could very well panic, making the 2008 stock-market crash - with its resulting devastation of pension funds and 401(k)s - look like a minor economic blip. The government shutdown we worried about a month ago would look like a holiday in comparison.

Even if the crisis lasted for only a few days, the long-term effects would be calamitous. "If anyone wants to push that button, which I think would be catastrophic and unpredictable, I think they're crazy," Jaime Dimon, CEO of the investment bank J.P. Morgan Chase, told the Associated Press.

It's clear that tea-party-addled members of Congress don't really care about the deficit - or the debt. If they did, they would not have insisted on renewing the Bush-era tax cuts or continue to refuse to make the rich pay their fare share. That's a debate we can have, and that's what the 2012 election should be about. But threatening the stability of the U.S. economy as part of a political strategy is not only cynical - it's dangerous.