 The big story in the news this week is the U.S. debt ceiling and the prospect that the U.S. government, if it's not allowed to borrow even more than the 17 trillion it already owes to bondholders, will not be able to make its interest payments, will have to default on the federal debt. So this is a bit like a family that has maxed out its credit cards and is not being allowed to borrow anymore by the credit card companies. So raising the debt ceiling would be like getting a new credit card. Failing to raise the debt ceiling would mean cutting up your credit cards and devoting all of your energy to paying off your existing bills without incurring any new ones. Now we're told by the president and congressional leaders in the media that this is absolutely impossible, that the U.S. has to be able to borrow more money than it's already borrowed to be able to meet all of its financial obligations. But think about what this means. This means that government spending is so completely out of control that we cannot even pay the interest on our existing debt without adding to it by borrowing even more money and further increasing the debt. Now let's think about this more systematically. First of all, there's no reason at all to think that the U.S. cannot pay the interest on the current debt if that is deemed necessary. The projected interest payments on Treasury bonds for this year about $240 billion. That sounds like a lot, but the total federal budget is about $3 trillion. That's about 6% of total federal spending. So if we wanted to pay the interest, all we would have to do is reduce government spending, federal government spending by about 6%. Well, I think the last couple of weeks of the shutdown have suggested to most people that there might be a teeny, teeny bit of fat in the government budget. I'd be happy to start by closing Guantanamo Bay, scaling back or shutting down the NSA, getting rid of foreign military assistance, and so on. I think we could easily find enough in the federal budget to make those interest payments. What if we can't? Or what if it just isn't politically possible to do so? Then we're told the U.S. might have to default on the debt. In other words, the Treasury might miss an interest payment. Now individuals miss interest payments on their credit card all the time. It's not at all unusual for companies to have to restructure their debt or renegotiate with their creditors. Even countries and U.S. states have done this in the past. What does it mean? Well, if you miss a credit card payment, there are some consequences, right? The credit card company won't loan you any more money. They might reduce your credit limit. They may very well increase your interest rate and your credit rating will go down. So if the U.S. were to miss an interest payment, so-called default on the debt, or otherwise attempt to restructure its debt, then the credit rating of the U.S. would fall. Interest rates would rise. Borrowing costs to the U.S. would rise. It would be harder for the federal government to borrow money. Is that a bad thing? Well, that would impose some fiscal discipline on the President and Congress. Just as a personal bankruptcy, well, not in any way a good thing, has the result of imposing fiscal discipline on an individual. And again, same thing with a company. So if government spending is so out of control that we cannot manage even to pay the interest on our current debt without taking on even more debt, then the time is right to make some fundamental changes. In my Mises Daily article for today, I go through some of the technical arguments about why a default or restructuring would probably not be as bad as it's been made out to be by the government and the media. But even so, we should consider the broader lessons here that we need to have more fiscal responsibility within the U.S. budget process. We need to find ways to reduce government spending, not to facilitate even more of it. If that means the government cannot stimulate the economy in Keynesian fashion, so much the better.