I need to meta a post: Debt Ceiling Analogies

Don't read this unless you're linking from the other article posted today. Sssh. Secret stuff inside.

"This is so fundamentally stupid, I can't come up with an analogy."  Note for a moment that I once described a large fraction of stellar dynamics using the actions of "big puppies" and "little puppies."  I even once stretched the puppy analogy to do relativity, although by that point I was clearly just accelerating puppies to nearly the speed of light for fun.

If I can't come up with an analogy, I will propose that an analogy doesn't exist.  That doesn't stop people, though:

• "Your son has been boarding outlaws and hoodlums in your basement. He’s feeding them, clothing them and providing them entertainment, drugs and hookers. He’s using your money to support these people, in your own home, that also hate your guts."  This totally not racist guy is using a "family maxing out the credit card" analogy to explain that the debt ceiling is the limit on the credit card.
• "Due to the large balance, your minimum payment every month is $300.  So now your income of $1,000 a month exactly meets your bare necessities PLUS your minimum required payment to avoid default.  You can no longer buy anything excessive since you have spent your savings and maxed out your credit card. The important thing is that you are NOT in default.  You just have to cut back on the $200 excessive spending a month that you have grown accustomed to.  You also won’t be able to save any money or have the benefit of occasional splurges that you enjoyed in the past."  Hey look! Single person with a credit card! The antisocial version of "family with credit card."  
• "If the government maxes out its credit card without cutting back on spending, it will eventually have to face a stark choice: stiff its lenders (leading to god knows what sort of financial meltdown) or prioritize its accounts payable from most important to least important (with the latter not getting any more government cash)."  Once you slog through all the gibberish and nonsense in that article, you realize they made the credit card claim in like paragraph one, and you missed it, because you were sure that the braintrust over at Reason would have something different.  Nope.
• "The list of things "B" has to buy consists of G, H, I, J,and K. Well "B" is out buying stuff and having a fine time and getting some really good deals. When he buys "H", the "H" salesman tells him that he also ought to buy "Q" because sooner or later his business is going to need "Q" and if he buys it right now he can get a 50% discount on "Q." Well that sounds like too good a deal to pass up, so "B" buys "Q" along with "H." " Despite looking like some sort of bizarre alphabet run slave trade, this eventually boils down to "you're in a business, and have a credit card."
• "The missus says that $10 is really, kinda, sorta insignificant compared to the $50,000 in new debt you're taking on every year. So at last you tell her you can embezzle $4,000 per year from your employer and cut your spending by $8,000, so you'll only slide $38,000 into the hole each year. You say all this with a great scowl, moaning about how hard it's going to be to reduce your standard of living so drastically. Then you tell her it was so much work calculating all those terrible cutbacks that you deserve a night out on the town to celebrate your newfound sobriety and prudence." "family/credit card with added implication of fraudulent practices (because we are making an analogy for the government and are witty)"

So, google's first page of results agrees that the debt ceiling is the equivalent of a household with a credit card that has a limit.  

My credit card has an interest rate of like 9% or something, and a limit of like $10k (I think?).  So each time I want to use it, I have to check that I haven't overdrawn, and then make my purchase, and pay back that money at that 9% rate every year.

Now, let's assume a glorious revolution, the conclusion of which allowed me to say "L'État, c'est moi."  I no longer need to fund my purchases with my credit card.  I decide what I want to buy, and issue a set of bonds to the market that contain a promise to repay over a given term at a given rate.  So, you know, a loan.  I issue as many as I need to fund my purchases, under the assumption that the market is willing to buy.  Since my state is large, productive, has a valid tax system, and currently underpins the global bond market, the market is generally willing to buy.  In fact, right now, I can sell people bonds that have interest rates so low that when they mature at the end of their term, the interest rates paid on the bond do not account for the change in value of the bond price due to inflation.  I can literally borrow money at negative interest.

Therefore, as long as the market believes I can repay bonds, I can continue to issue bonds.  So what happens if a set of bonds comes due and I don't have the funds to cover it, and the market decides it's going to be a jerk this day and not buy a new bond to fund the old one?  Well, I can turn to the other aspect of the state that I control, and print sufficient money to cover that cost.  I have prevented my default on that bond, proving that I can always repay my bonds, re-establishing the strength of the system.

HYPERINFLATION!

Yes, but that would require me to be doing like everything on bonds.  Look at this curve stolen from wikipedia:

You'll note that the revenue curve and the outlays curve are not seriously diverging.  Blah blah wars blah blah unreasonable tax cuts blah blah are a large part of the reason we do not have that late 90s surplus anymore.  But, still, we are generally bringing in a decent fraction of revenue to pay the bills.  So, the odds that we'll need to push on the printing press to solve the problem isn't actually true.

This was already too long for a meta-post, but the main take-away is this:

1. The debt ceiling is not the limit on an imaginary credit card.
2. The government is not the same as a household.  Or a business.
3. The government has a better credit rating that you can ever dream of.
4. The government has the ability to print more money as needed, something that would get a household thrown in the slammer.  You don't control the currency because your credit rating, frankly, sucks.  Your money isn't backed up by anything.