President Obama and Congress face a mess if the federal government hits the debt ceiling Aug. 2. The Bipartisan Policy Center, a Washington think tank, projects that the government will receive $172 billion in revenues between August 3 and August 31, but it is on the hook to spend $306 billion, leaving a shortfall of $134 billion.
Not so. The $172 billion in revenues collected over the rest of the month can pay the $29 billion interest charges on the national debt, Social Security benefits ($49 billion), Medicaid and Medicare ($50 billion), active duty military pay ($2.9 billion), Department of Defense vendors ($31.7 billion), IRS refunds ($3.9 billion), and about a quarter of the $12.8 billion in unemployment checks due that month.
There will, however, be no cash for highway construction, no checks for federal workers or retirees, no agriculture payments, no open national parks. Interest rates are also likely to rise if U.S. debt is downgraded, adding massively to the deficit and further damaging the economy. This would be a disaster with no political winners.
The president wants a $2.4 trillion debt-ceiling increase to get him past next year's election—and the deal he's proposing is based on promised future cuts paired with substantial tax increases on households earning more than $250,000 a year.
House Speaker John Boehner proposed matching a debt-ceiling hike with substantial spending cuts. The Congressional Budget Office estimates federal spending at $46.1 trillion over the next 10 years, a dramatic escalation from projections before Mr. Obama took office. Mr. Boehner's modest proposal was to trim that back 5.2% over the decade, but the president balked.
Karl Rove is a former senior adviser and deputy chief of staff to President George W. Bush. He is a Fox News contributor and author of "Courage and Consequence" (Threshold Editions, 2010). To continue reading his column in The Wall Street Journal, click here.