Morici: Raising the Debt Ceiling, a Fool's Journey

NEW YORK ( TheStreet) -- The federal government will default on its debt only if President Obama wills it. House Republicans, by refusing to raise the debt ceiling until they obtain budget reforms, may be the country's last hope to avoid a financial ruin.

Each month, the government collects $250 billion in taxes, and pays $23 billion in interest to public bondholders. If Washington can't borrow more money, it will not be able to spend all that it has planned. It comes down to who gets paid and what doesn't get bought.

Americans are not deadbeats. Families without enough money do all they must, like pay their mortgages and credit cards, and cut back elsewhere. So must Washington.

Treasury Secretary Jack Lew says he can't set those priorities. In an emergency, as the government's chief financial officer, that is exactly what he is paid to do. However, cutting back entails postponing, for example, the expansion of Medicaid as required by the Affordable Care Act and grants to universities for faculty summer money.

By not raising the debt ceiling, congress is not reneging on bills already racked up. The existing debt -- which can be serviced by paying the interest due -- covers those obligations. Raising the debt ceiling simply permits Congress to run up new bills. And abandoning that debt ceiling discipline, as many in the financial community suggest to let congress to spend as it pleases would be the peak of folly.

Studies by the Congressional Budget Office and Medicare and Medicaid actuaries plainly indicate if the government continues taxing, spending and borrowing as current law requires, then all Americans, and not just the wealthy, will be paying greater shares of their income on taxes and private health insurance. Federal spending on Social Security and health care will rocket and squeeze out spending on roads, education and other worthwhile activities.

Over the next several decades, budget deficits and the national debt will jump to unbearable levels.

The interest rates investors demand to purchase government bonds and resulting debt service will cripple Washington much as those did Greece and Italy in the years before their crises.

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