Would you lend America money?

There’s a lot of talk about the debt ceiling lately.  Of course, most of what is said is non-factual; politicians and media members are demagoguing the issue like usual.  In a democracy, you need only scare half to rule all.  It seems as if that fear-mongering tactic is the path Washington has taken once again.

Amongst the painfully obvious lies coming from the President and the media, possibly the most outlandish thing I have heard is that if America raises the debt ceiling then our credit score will actually improve.  If we fail to do so, our credit score will be hurt.  This logic proves that the discussion has truly become a damn circus.

You do not need to be an economist to figure out that it is complete BS to say that if America takes on more debt we’ll be more desirable to lenders.  If an individual approached you and asked for a loan, what would you look for to decide whether or not you should lend money to them?  Assuredly, you would look for any debts present on their record.  Have they paid off their debt in the past?  Do they borrow money to pay off debt or do they pay it off with real, solid money?  In its most basic form, it is the same with countries.

So, if America asked you for money — would you lend Uncle Sam a loan?  How about if you found out that Sam was going to spend more money, go deeper into debt, and therefore need to borrow even more?  Would you still lend him money?  Of course not.  Why, then, do we hear the most powerful people in our country say that more debt is the answer to improving our credit score?

UPDATE:  The debt ceiling has been raised but, not surprisingly given what I’ve argued, the credit scores remain in peril.

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