At current rates of spending, the federal government may bump up against its debt limit as early as March. Treasury Secretary Timothy Geithner warns that it will be "catastrophic to the economy" if Congress doesn't increase Uncle Sam's credit limit. Writers in conservative outlets call for Republicans to use this opportunity to extract significant spending cuts before extending the limit. And some extreme libertarians argue that the debt ceiling shouldn't be raised, because a government default would be a good thing for the American people.
In this article I'll explain the basic situation and comment on each of these views.
Uncle Sam Has Painted Himself into a Corner
Ever since 1917, Congress has allowed the Treasury the discretion to issue new debt (i.e., borrow money from other agencies or individuals). At that time, the thinking was that the executive branch needed the ability
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