Default not so much

It is distasteful that all of the media outlets a mischaracterizing the debt limit implications. Every time I hear a talking head on TV discuss the debt limit they use the term default as a synonymous with not raising the debt limit. This is simply inaccurate, and grossly misleading.

Let's take our own finances as a starting point for perposes of simplification. Let just say John here makes $5000 per month. John isn't comfortable with the life style that his pay check provides. John applies for a credit card with a $2000 limit and goes shopping. He got a credit limit that is roughly 40% of his income. The question is simply is it wise for John to raise his credit limit or to pay off his debt?

This is the same position our government is in. Not raising the debt limit dose not preclude the ability of the federal government to collect revenue. The government currently collects $260 billion per month. The payments on the barrowed money is about $30 billion. The government will hardly default on its debt if they do not raids the debt limit. The only real consequence would be that the government will have to live with in its means just like John.