Palin: Not raising debt limit doesn’t mean economic collapse

***UPDATE: Sources added validating Palin’s claim***

Out of this entire interview, I must say that Palin’s comments on raising the debt limit caught my interest more than anything, which come in two parts between 3:30 and 5:30. Here is much of her answer on why shouldn’t raise the debt limit:

There does not have to be an economic collapse or a shutdown of government just because the fiscal conservatives decide not to change the goal posts again, to move them again, and raise the debt limit or the debt ceiling. …

Remember Judge again, we’re bringing in 6 billion dollars a day. Out of that 6 billion dollars if we service our debt, if we fund national security and constitutionally mandated services – just the essentials – and we do that first and then there doesn’t have to be a shut down just because politicians are claiming that there would be a shut down if we don’t increase the debt limit.

Obviously Palin is intertwining a major cut in our spending habits in her answer. As to whether this is possible in the short run I don’t know. But her answer seems to stand in contrast to what Paul Ryan told Mark Levin on raising the debt ceiling. Ryan said that if we don’t raise the debt ceiling, then default would occur:

Default would occur and that is a serious dangerous problem. If default occurs then you double dip the recession, interest rates go up, and there are a lot of bad things – read the Geithner letter if you want to see the apocalyptic vision they put out there.

Palin is saying we don’t have to raise the debt ceiling, that in fact we shouldn’t raise it in order to draw a line in the sand. Paul Ryan says that if we don’t raise it that we are going to have some serious problems to deal with, and in his statement to Levin, it sounds like he is suggesting that we would have some sort of economic collapse.



Here is Palin’s full interview where she talks about the budget, politics in Wisconsin, drilling for oil and of course Donald Trump:

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UPDATE: It would appear that Paul Ryan’s statement that the country would default if we didn’t raise the debt limit may not be exactly accurate. Here is an excerpt from an article Ian from C4P sent me by Stan Collender at Roll Call:

Second, and again contrary to what some have stated as gospel, reaching the debt ceiling will not automatically lead to a federal default on the nation’s existing debt. That will only stop the government from borrowing more than the current limit and force it to rely on other ways to finance its activities.

Although the comparison isn’t perfect, the situation is similar to what happens when individuals max out credit cards. They don’t stay home with the lights off, gently rocking back and forth in a corner; they find other sources of money or change their activities to match the cash available. That could mean delaying paying a bill, taking cash from a savings account, getting a loan from a family member or friend, waiting for the next paycheck, or selling a car or some other possession. If they make a payment to bring their maxed-out credit card below the limit, they can borrow again, too.

In a letter last week to Speaker John Boehner (R-Ohio) about the debt ceiling, Treasury Secretary Timothy Geithner mentioned that the federal government has an equivalent to each of these things. What Geithner didn’t mention is that the federal government also has a number of other tactics, such as leasing an asset — the federal equivalent of renting out a room in your home — or significantly slowing down payments to government contractors and others. These additional tactics may not have been used in the past and may be disheartening or even embarrassing to some, but they are available to avoid a crisis.

Here’s another source that also contradicts what Ryan said above:

In a debt limit crisis, the government continues to operate normally unless there is a concurrent lapse in spending authority. The Treasury begins to take some extraordinary actions to avoid breaching the debt limit but retaining enough cash to meet current expenditures. The fear during a debt limit crisis is that Congress or the Administration may carry the charade too far, and the Treasury will not have enough cash to make an interest payment or to make payments, such as the large Social Security payments at the beginning of each month. This has never happened.

So it appears that Palin is correct and that Ryan got this one wrong, that we don’t have to increase the debt limit. I will say that the leadership vacuum in Washington does give me pause though, wondering if the Administration would do all that they can to avoid a default. Considering that one point, Paul Ryan could be correct. I’d love to hear him expound on that.

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