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FELIX SALMON: The US won?t default, even if the debt ceiling stays. In any given month, the go?

By Glenn Reynolds

FELIX SALMON: The US won?t default, even if the debt ceiling stays.

In any given month, the government?s income dwarfs its debt-service obligations, which means that the government could simply pay all interest on Treasury bonds out of its cashflow. Greg hasn?t run the numbers on principal maturities, but I?m pretty sure that they too could be covered out of cash receipts?and when that happened, of course, the total debt outstanding would go down, and we wouldn?t be bumping up against the ceiling any more.

The point here is that the government has enormous expenditures every month, and debt service constitutes an important yet small part of them. If the debt ceiling weren?t raised, it stands to reason that just about any other form of government spending would get cut before Tim Geithner dreamed of defaulting on risk-free bonds.

So they could just . . . cut spending in response? No way, that’s crazy-talk!

Full post as published by Instapundit.com on January 15, 2011 (boomark / email).