The United States reached its “oh s*!$” moment this week as it hit the debt ceiling on Monday. Treasury Secretary Tim Geithner said adjustments to US spending on federal pension would have to be adjusted until the August deadline to meet current obligations.

How much is the U.S. National Debt currently? Roughly $14 trillion. It’s ok if this number is too big for the noggin to comprehend. ONE trillion would pay the entire cost of college for every student in America AND it would also pave the entire interstate highway system with 23 karat gold. Sweet.

Here are some handy myths and truths regarding the debt ceiling:

Myth: America will “default” on its obligations if the debt ceiling isn’t raised.

Truth: Treasury can still roll over debt as its bills and bonds come due — and easily cover the interest out of its monthly receipts. It simply can’t engage in new borrowing because that would raise the total amount of debt beyond the statutory limit.

Myth: The government will “shut down” if the debt ceiling is not raised.

Truth: The feds simply won’t be able to spend in excess of what they take in. So they’ll have to prioritize outlays — a government cutback, not shutdown. They can delay paying some bills, or even furlough some nonessential federal employees. The latter seems only fair — as you may recall US public-sector payrolls swelled by 500,000 during the Great Recession, even as the private sector suffered nearly 8 million in job losses.
(As time marches on, it’s true the feds wouldn’t be able to fully spend the agreed upon budget, but all that means is that the feds — like the taxpayers — would have to live within their means, at least for a while.)

Myth: Aug. 2 deadline is a hard date.

Truth: The “extraordinary measures” Geithner can take, including not issuing more IOUs to Social Security and Medicare and state and local governments, will push the date out even further — and that’s just when Treasury needs to start its belt tightening. Indeed, the Treasury has taken such measures time and again in past battles over raising the debt limit.

Myth: Not raising the debt ceiling will send shock waves through the debt markets, bringing a downgrading of Uncle Sam’s credit rating and sending federal borrowing costs through the roof.

Truth: The debt markets fear the debt (and debt limit) going up, not the reverse. When credit rater Standard and Poor’s recently lowered its “outlook” on US debt from “stable” to “negative,” it did so based on its prediction that “in two years” US debt, now 99 percent of GDP, would hit 105 percent of GDP. Investors fear a lack of major spending cuts not a failure to raise the debt limit.

Myth: The United States will “default” on its commitments to grandma if the debt ceiling isn’t raised.

Truth: Social Security checks and Medicare reimbursements will still go out unless the Obama administration decides to withhold them. Yes, both programs are headed for bankruptcy, so benefits must come down eventually — but that’s a different fight. No one’s pushing major reform of either program as part of the debt-limit battle.

Myth: It would be grossly irresponsible to “close the gap” without raising taxes “on millionaires and billionaires.”

Truth: According to the IRS, all income for people earning (as joint filers) more than $200,000 comes to less than $1.9 trillion. The Bush tax cuts run 4.6 percent at the highest bracket. That amounts to $87 billion for all joint returns over $200,000 — barely a 20th of the Obama-era deficit levels. Even if the feds took every penny of that income, it wouldn’t cover the gap.

So when you hear the talking heads using terms like “reckoning day” or “apocalypse” or that the “baby Jesus will return” if we don’t raise the debt ceiling, this is simply not true.

The Federal government still gets over $2 trillion a year in tax revenue, and this will not stop. We have a spending problem in Washington, not a revenue problem.