On default, President Obama is not lying

Whitehouse.gov

President Obama delivers a statement and answers questions from the press on the government shutdown and the upcoming debt ceiling increase in the Brady Press Briefing Room at the White House.

Article Highlights

  • On debt ceiling, Obama's not lying -@stanveuger

    Tweet This

  • Not raising the debt ceiling would have large negative consequences

    Tweet This

  • Those who think they can not raise the debt limit and be ok are wrong

    Tweet This

As the nation is approaching its debt limit, views as to what constitutes default, whether default can be avoided through payment prioritization and what the consequences of default would be are still diverging along partisan lines. The administration, as well as many outside observers, has painted doomsday scenarios; many conservatives, most prominently represented by Rep. Ted Yoho, R-Fla., have begged to differ.

I am personally in the first camp, and certain financial-market indicators suggest that those with money at stake are as well. For example, the interest rates faced by the Treasury Department when selling Treasury Bills have started soaring (see the graph below; data comes from the Treasury Department), indicating concerns that a U.S. default on its sovereign debt is a real possibility.

That said, the president did the non-Yohoistas no favor yesterday, when he implicitly acknowledged that payment prioritization, which many conservatives have lauded as an acceptable path forward, is indeed possible. This flies in the face of earlier claims that such a thing was legally and logistically undoable.

Of course, moving from obfuscation to clarification constitutes progress in and of itself. The problem here is that this new stance will strengthen the convictions of conservatives who have never trusted the administration's broader claims to begin with. Their reasoning may now well be that after lying about the impact of the sequester, lying about the IRS' targeting of tea party groups, lying about Fast and Furious and lying about Benghazi, the administration is now lying about the risks of not raising the debt limit, just to get its way. That inference is not entirely unreasonable.

But this time, the administration is not lying. This time, those conservatives who see no downside risk are wrong. Let us hope they realize that soon, in spite of President Obama's lack of leadership turning any and all budget fights into almost insurmountable obstacles on the road to full recovery.

Stan Veuger is an economist at the American Enterprise Institute.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Stan
Veuger

What's new on AEI

Four years of Dodd-Frank damage
image Dodd-Frank, financial institutions, and public opinion
image Time for an Anwar Sadat moment in the Middle East
image Freedom of the skies at risk
AEI on Facebook
Events Calendar
  • 21
    MON
  • 22
    TUE
  • 23
    WED
  • 24
    THU
  • 25
    FRI
Monday, July 21, 2014 | 9:15 a.m. – 11:30 a.m.
Closing the gaps in health outcomes: Alternative paths forward

Please join us for a broader exploration of targeted interventions that provide real promise for reducing health disparities, limiting or delaying the onset of chronic health conditions, and improving the performance of the US health care system.

Event Registration is Closed
Monday, July 21, 2014 | 4:00 p.m. – 5:30 p.m.
Comprehending comprehensive universities

Join us for a panel discussion that seeks to comprehend the comprehensives and to determine the role these schools play in the nation’s college completion agenda.

Event Registration is Closed
Tuesday, July 22, 2014 | 8:50 a.m. – 12:00 p.m.
Who governs the Internet? A conversation on securing the multistakeholder process

Please join AEI’s Center for Internet, Communications, and Technology Policy for a conference to address key steps we can take, as members of the global community, to maintain a free Internet.

Event Registration is Closed
Thursday, July 24, 2014 | 9:00 a.m. – 10:00 a.m.
Expanding opportunity in America: A conversation with House Budget Committee Chairman Paul Ryan

Please join us as House Budget Committee Chairman Paul Ryan (R-WI) unveils a new set of policy reforms aimed at reducing poverty and increasing upward mobility throughout America.

Thursday, July 24, 2014 | 6:00 p.m. – 7:15 p.m.
Is it time to end the Export-Import Bank?

We welcome you to join us at AEI as POLITICO’s Ben White moderates a lively debate between Tim Carney, one of the bank’s fiercest critics, and Tony Fratto, one of the agency’s staunchest defenders.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.