Legislation of a debt ceiling does not absolve the US from its obligations.
UPDATE: The 14th Amendment of the Constitution clearly states that Congress must not default on its obligations.
While the USA frantically tried to save the world with a nuclear arsenal they could never use and military overspending on wars that did no good, we see the East’s rise to financial domination by engaging huge numbers of lowly paid workers to export in a way that nobody was able to compete with. If you want something manufactured, get it done in China has been the wisdom of the past 60 years. Market forces!
The agenda of the lever pullers seems to be to froce the USA to default and evade repayment. By making it effectively illegal for the USA to meet its obligations, the USA will have to default. The net effect of the USA not borrowing any more is being described in philosophic terms – what would the result be?
I think the answer to that not yet knowable. But certainly creditor nations will invest elsewhere and perhaps it will be the final straw that breaks US economic hegemony. Time for a new deal?
If Obama was to be effective, he needed the Democratic support in his first two years. Sad that they fiddled while the midterm elections were lost. Back to American isolations, anyone?
comment in the Guardian
http://www.guardian.co.uk/world/2011/jul/31/us-debt-congress-tea-party?commentpage=last#end-of-comments
The Obama argument is along the lines of “we must make the mortgage payment and feed the children” and the Tea Party seems to be “if we default, that will show them!”
The debt ceiling is not a new agreement on borrowings. It is entirely necessary to be be able to meet existing obligations without exponentially printing money Zimbabwe style.
If the Tea Party ethos is to bite, they will have to raise the debt ceiling, while enacting policies that reduce spending. Because they refuse to raise taxes, they will have to starve the children. If they were in power they could do that. The Tea Party are not in power but are hamstringing the Republican effort to put a lid on spending.
A default causing the ongoing costs of the existing debt to multiply is not in the interests of reducing debt. It is a Russian Roulette with the economy they play, with 5 bullets in the chamber.