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With the White House and the House of Representatives still at loggerheads over how to resolve the debt crisis, administration officials are turning up the heat, claiming that Washington has only two choices: increase the government’s borrowing capacity beyond the current $14.3 trillion limit or face a catastrophic U.S. Treasury default. If the latter happens, they warn, the government won’t be able to pay its debts and will have to stop cutting checks.
But this is a false choice. There’s a third option: Washington can cut spending.
When times are tough, responsible citizens tighten their belts. During the recession, for example, Americans cut spending significantly, while increasing their rate of saving. According to the Census Bureau, personal saving as a percentage of disposable income more than doubled during the downturn, increasing from 1.7 percent in 2007 to 4.3 percent in 2009.
Meanwhile, the federal government did the opposite: It went deeper into debt. The White House wants Congress to authorize even more borrowing, warning that if the debt ceiling isn’t increased by August 2, the United States will be forced to default on its obligations and its credit rating will be downgraded, making future borrowing that much more expensive. . . .