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http://www.foxnews.com/opinion/2011/01/06/obama-officials-play-chicken-
little-debt-ceiling/

Obama Officials Play Chicken Little With the Debt Ceiling
By�John�Lott

Published January 06, 2011 | FoxNews.com

Two years into the Obama administration and the overused tactic of claiming 
crises to push legislation is becoming tiresome.

Remember, immediately after President Obama came into office, we were 
warned that if the massive Stimulus program wasn't passed immediately, 
unemployment would go up above 8.1 percent. And the health care takeover 
had to be passed by August 2009 or public and private health care costs 
would spiral out of control.�

Of course, it is now obvious that neither the stimulus program nor 
Obamacare had any prospect of accomplishing their stated goals. And then 
there was the start treaty with Russia which absolutely had to be passed 
quickly last month or real damage would be done to US-Russian relations. 
Yet, in what was widely seen as a slap against President Obama, the 
Russians didn't see any urgency in passing the treaty, and indeed they 
still haven't passed it.

Now the Obama administration is warning of disaster if Congress doesn't 
quickly pass an increase in the debt limit. The federal debt last week 
passed $14 trillion, up from over $10 trillion at the beginning of the 
Obama's presidency. But with the federal government authorized to borrow a 
maximum of $14.29 trillion, the federal government won't be able to borrow 
more money after the beginning of March unless the debt ceiling limit is 
increased.

According to Austan Goolsbee, chairman of the Obama's Council of Economic 
Advisers, the �impact on the economy would be catastrophic" if congress 
fails to pass the debt ceiling and a vote against passing the debt ceiling 
would produce "the first default in history caused purely by insanity.�

Such hyperbole does not pass the most cursory scrutiny: "the first default 
in history" surely seems to imply that congress never before failed to pass 
a debt ceiling increase, yet it has happened over and over before. Examples 
include: December 1973, March 1979, November 1983, December 1985, August 
1987, November 1995, December 1995 to January 1996, and September 2007. And 
no, there was no crisis in the economy nor any default. Instead, the 
government simply was forced to temporarily stop borrowing and cut spending 
to align expenditures with revenues. And on Thursday, Treasury Secretary 
Timothy Geithner said, "Even a very short-term or limited default would 
have catastrophic economic consequences that would last for decades� For 
these reasons, I am requesting that Congress act to increase the limit 
early this year, well before the threat of default becomes imminent."

Even the two infamous government shutdowns -- for five days in late 
November 1995 and then a few weeks in December 1995 and January 1996 -- did 
not lead to a default. They do not seem to have damaged the economy either 
as there was no increase in unemployment during either December 1995 or 
January 1996. And quarterly GDP kept chugging along. -- The main drawback 
is that some Federal employees had to miss a paycheck or two, certainly a 
non-trivial problem for some individuals who did not have any money saved 
up.

Ironically, back in March 2006 when President Obama was a Senator, he had 
no problem voting against a stand alone debt limit extension. The final 
vote was a close 48 against the increase to 52 in favor of it, but back 
then he was very upset about the then $248 billion deficit. On the Senate 
floor, Senator Obama complained: �The fact that we are here today to debate 
raising America's debt limit is a sign of leadership failure. It is a sign 
that the U.S. Government can't pay its own bills. It is a sign that we now 
depend on ongoing financial assistance from foreign countries to finance 
our Government's reckless fiscal policies. ... Increasing America's debt 
weakens us domestically and internationally. "

And, of course, during the 2008 presidential campaign, Obama promised time 
after time "a net spending cut" to make government smaller than it was then 
in order to cut the deficit.

Hopefully a government shutdown will be avoided. But there can be benefits. 
Newt Gingrich argues that the shutdowns in 1995 and 1996 were used as 
leverage to force President Clinton to agree to four years of balanced 
budgets. With the 2011 deficit predicted to be an astounding $1.5 trillion, 
the third year in a row with such a large deficit, the gain from fiscal 
sanity from using the debt limit to get some cuts in spending will far 
outweigh any short-term inconveniences.

John R. Lott, Jr. is a FoxNews.com contributor. He is an economist and 
author of "More Guns, Less Crime"(University of Chicago Press, 2010), the 
third edition of which was published in May.


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