Sunday, May 1, 2011

Raising the ceiling on a cracked foundation

The other day Paul O'Neill said that ...

Oh, wait. I suppose I ought to explain who Paul O'Neill is. A decade ago, he was President George W. Bush's first Treasury secretary. I have no very clear memory of him except that he toured Africa with Bono and they were photographed in matching tribal dress looking like Col. Gadhafi's Mini-Me twins at a Tripoli sleepover. Other than the dress-up fun, I've no idea why they were in Africa, but you paid for it, so I'm sure there was a good reason.

Anyway, Secretary O'Neill popped up the other day on Bloomberg Television to compare debt-ceiling holdouts to jihadists. "The people who are threatening not to pass the debt ceiling," he said, "are our version of al-Qaida terrorists. Really."

Really?

Absolutely.

"They're really putting our whole society at risk by threatening to round up 50 percent of the members of the Congress, who are loony, who would put our credit at risk."
But hang on, generally speaking, when you hit your "debt ceiling," your credit is at risk. If you've got a $10,000 credit card, and you run it up to the limit, but you need a couple more grand right now, pronto, because you outspend your earnings by 50 percent every month, and you have no plans to change that anytime soon, well, the bank might increase the limit to $15,000, or $20,000. Or they might not. There is a question mark over your credit because there is a question mark over your creditworthiness: It is at risk.

Paul O'Neill seems to regard that attitude as unhelpful. So does Timothy Geithner, his successor at what is still laughingly known as the United States Treasury. Secretary Geithner says that even to be discussing the debt ceiling is "a ridiculous debate to have."

Ridiculous?

Absolutely.

"I mean, the idea that the United States would take the risk that people would start to believe we won't pay our bills," continued Geithner, "is a ridiculous proposition, irresponsible, completely unacceptable." The best way to convince people to believe we'll pay our bills is to borrow up to our limit, and then increase the limit and borrow a whole bunch more. This would be the 75th increase in the debt ceiling in the past half-century. Let's just get it done, and resume the party.

But if Geithner thinks that even discussing the question is "ridiculous," then, as my colleague Jonah Goldberg put it, why have a debt limit at all? What's the point?

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