The debt ceiling was technically reached on Dec. 31 and the Treasury is now engaged in shell games that will keep the lights on until about March 1. After that, the consequences could be pretty messy, as explained here. The Treasury will not have the cash needed to pay current bills and will have to stiff somebody — Social Security recipients, federal employees, suppliers or who knows. I wouldn’t be surprised if some smart people are trying to think of ways to get money from the Fed, which has a monopoly on money creation, to the Treasury while sidestepping the Debt Ceiling.
If the Republicans try to use the debt ceiling as leverage to get the spending cuts they say they want (not defense cuts of course), they will lose. Obama will cross his arms, there will be chaos for a few days, and then the Republicans will cave and the president will win. Another tactic is needed. Here’s my modest suggestion to the Republicans: raise the debt limit to $100 quadrillion ($100,000,000,000,000,000). For one thing, it’s time we learned a new “illion.” I know, it wasn’t long ago that we learned to say “trillion” but we might as well get quadrillions teed up and ready to go. More seriously, this move would focus on the Obama spending orgy and the explosion of debt that could follow. Default on the debt or hyperinflation would not just be financial upheavals but could rend the very fabric of society. This is where the Republicans should focus, not on the debt ceiling.