


In context, it’s clear that by “the United States,” Geithner really means “the United States government.”





Wait a minute. If you succeed in making principal and interest payments, don’t you avoid default? Wolin is equivocating on the term “legal obligations.” As I understand the term “obligation,” the government is not obligated to pay for goods and services when it doesn’t get those goods and services. So the government could cut the goods and services it buys without violating any obligations.

Toomey wrote a letter to Geithner on February 2 taking on Wolin’s sloppy reasoning. Geithner replied on February 3 and gave an analogy. Geithner wrote:


(I couldn’t find the whole letter on the web; I got it from Senator Toomey’s office.)

Again, wait a minute. Notice Geithner’s mixing of debt obligations and other expenditures. On car payments and student loan and credit card payments, Geithner is right. But on insurance premiums and utility payments, he’s wrong. Those are not typically debt obligations. Geithner is effectively saying that if the government wants to spend x and has only enough money to spend 0.67x, then not spending on the other 0.33x is a failure to keep an obligation. In a political sense, that might be: the government has made a lot of spending promises to a lot of people. But in an economic sense, it’s not. On the narrow issue of whether failure to raise the debt limit would necessarily mean U.S. government default on its debt, Toomey is right and Geithner is wrong.