In Which Zandar Answers Your Burning Questions

Glenn "Instapundit" Reynolds asks:

SO HERE’S A QUESTION: Would a default on Treasuries accomplish what the Balanced Budget Amendment was supposed to achieve, by forcing the government to spend no more than it takes in? With more collateral damage, of course. . . .

Short answer:  No, you ass.

Not-so-Short but more polite answer: if you mean by "more collateral damage" the effective collapse of the global economy, then the answer's still no because Treasury still collects taxes and would be forced to use that by law to pay off debt payments.  Oh yes, and we'd have no functional economy.

Long answer: What Bruce Bartlett said:

The disruption to financial markets, commerce and the well-being of all Americans from a Treasury default are really beyond my ability to fully describe. But here are a few points to ponder. Interest rates would skyrocket to unprecedented levels, which would cause a collapse of private borrowing and massive capital losses for all bond holders, which include pension funds, insurance companies and foreign central banks, among others. It might be impossible for pension funds to make payments to millions of individuals depending on them for life itself.

The economy would really grind to a halt long before interest rates got so high that default was even on the radar screen. And insofar as the Fed was forced to monetize the debt in order to support the bond market it would lead to hyperinflation. Is Reynolds really willing to turn the U.S. into Zimbabwe just to make a point?

In conclusion, the idea that we should default on the debt rather than raise taxes to deal with a looming fiscal crisis is simply absurd and, frankly, irresponsible. But considering how many absurd and irresponsible ideas are now common currency among the sorts of people who read “Instapundit,” I have to worry whether dimwits like Glenn Beck, Sarah Palin and Michele Bachmann won’t soon be parroting the idea that a default on the debt is preferable to any tax increase whatsoever. This is an idea that needs to be nipped in the bud.

And Reynolds is still an ass.