Hitting the limit

The Secretary of the Treasury announces that the United States has maxed out its credit card:

Treasury Secretary Timothy Geithner has informed lawmakers that the government has officially hit the debt limit. Geithner made the announcement in a Monday morning letter to congressional leaders that said he was reducing the government’s investment in the two government employee pension funds as the nation entered a “debt issuance suspension period.”

The truth is that there is no way that refusing to take on new debt will lead to default. It doesn’t even make any sense. Think about it: does obtaining a new credit card mean that you are less likely or more likely to not pay the balance on your existing credit card? Attempts to associate the debt limit with default are simply dishonest, as an inability to obtain new debt is not synonymous with a lack of new revenue.