Yes, Not Raising The Debt Ceiling Would Be A Problem

George Mason University economist Don Boudreaux gives aid and comfort to the debt ceiling denialists, arguing basically that since he wishes the government would spend less money, there's no problem with randomly forcing a giant sudden stop in government operations:

Unlike him, I dispute the claim that failure to raise the debt-ceiling would have been a calamity. Sure, failure to raise the debt-ceiling would have prevented Uncle Sam from doling out as much money as he promised to dole out to countless numbers of people counting on moola from Washington. But even without a higher debt ceiling, the government's cash flow would have been more than adequate to pay all of its genuine creditors in full. No actual default would have been necessary.

What would really have been necessary is more accurately described as belt-tightening.

That each of the many programs that stood to be squeezed has a vocal support group is insufficient reason to avoid squeezing those programs. This fact is no less true for sacred cows such as Social Security, Medicare, and foreign wars than it is for federally subsidized bridges-to-nowhere and other such boondoggles.

Just take for example the case of a government boondoggle. Say you're in the hotel business. Someone makes a reservation to stay at your hotel a few months from now. The reason he's made the reservation is that he's planning on taking his family on vacation. The reason he's planning on taking his family on vacation is that he's got a job with a company that sells concrete. The reason the concrete company is employing the guy is that they're planning on selling the concrete to a road construction company. And the reason they're confident the road construction company will pay them for the concrete is that they have a contract. And the reason the construction company signed the contract to buy the concrete is that they have a contract to a build a bridge. And the reason they have a contract to build a bridge is that a law, duly enacted by the United States Congress and signed by the president, authorized the signing of a bridge-building contract. But one day the debt ceiling's not raised. So even though the contract exists to build the bridge, the money to pay for the bridge isn't forthcoming. So since there's no money to pay for building the bridge, there's no money to buy the concrete. Since there's no money to buy the concrete, there's no money to pay the guy who works at the company and no need for his work. And now he's furloughed and canceling his reservation at the hotel.

Now whether or not you want to call this chain of events a "default" or not, it's a huge problem for lots of people including people who are by no means moochers and looters. People are forming expectations and making plans about business that depend on the assumption that the government of the United States will in fact meet the financial commitments it has undertaken. That's not to say that no program ever can or should be cut, but merely to observe that there's a legitimate legislative process for reducing appropriations. It's kind of insane that we're living in a country where some people are so inflamed by passionate dislike of popular government programs that they're eager to cast the rule of law aside and create a situation where the executive branch would have to start arbitrarily deciding which existing statutes to follow and which to ignore.