[DEBATE] : President-Elect Obama Suggests Defaulting on the National Debt

[Miles Teg]

Dean Baker

Co-Director of the Center for Economic and Policy Research
Posted January 7, 2009 | 08:49 PM (EST)

President-Elect Obama Suggests Defaulting on the National Debt


President-elect Obama apparently believes that the crisis brought on by 
the collapse of the housing bubble will require defaulting on the 
national debt. The New York Times reported today that Obama believes 
that "changes in Social Security and Medicare will be central to efforts 
to bring federal spending in line."

While Medicare is projected to face shortfalls because of the incredible 
inefficiency of the U.S. health care system, the Congressional Budget 
Office projects that Social Security will be fully funded until 2049 
from its own stream of tax revenues and the U.S. bonds it holds.

If Mr. Obama plans to cut Social Security in the near future, then this 
effectively amounts to a default on the bonds held by the trust fund 
which were purchased with workers' Social Security taxes. If the budget 
situation is so dire that it is necessary to default on the government 
debt, then surely we should be considering defaulting on the bonds held 
by Robert Rubin, Peter Peterson, and other wealthy bankers, not just the 
bonds that were bought to pay Social Security benefits for the country's 
workers.

http://www.huffingtonpost.com/dean-baker/president-elect-obama-sug_b_156113.html?view=print