This is the Cato Daily Podcast for Thursday, July 28th, 2011.

I'm Caleb Brown.

The debt limit is meant to signal credibility by providing a constraint on federal spending.

But if the debt limit is simply raised every time

Congress and the president want to spend more, why have a debt limit at all?

Don Boudreau is an adjunct scholar at the Cato Institute and Professor of Economics at George Mason University.

We spoke at this week's Cato University in Annapolis, Maryland.

The way the word default is used now in popular debate is Uncle Sam's inability to pay for everything

he wants to pay for. But in fact, default has a specific meaning. It means failure to pay on time all of your creditors.

Uncle Sam has creditors, employees who haven't yet been paid,

including active service military,

holders of US government debt and interest on that debt.

There are a few other genuine creditors of the United States.

If you look at the data, though, those creditors for each of the upcoming months, those credit obligations are only about

half of the total income, cash income that Uncle Sam expects to get.

There's no need for Uncle Sam to default in any genuine way.

Now, if Uncle Sam doesn't borrow any more money

because the debt ceiling is not raised,

then after paying off his creditors, which

he has more than enough cash to do, and we'll has more than enough cash to do, and will have more

than enough cash to do, Uncle Sam will then have to make tough spending choices about which

programs to defund and which to keep.

...