US could default on bills for first time in history later this month, unless Congress authorizes the federal government to take on more debt. But raising the debt ceiling has stalled partisan mireleaving the United States to rush into default and raising tough questions about spending that may not be paid.
The federal government can only borrow money up to a maximum amount set by Congress. The United States hit that limit in August and hasn’t been able to issue debt since. Over the past few months, the Treasury Department has relied on fiscal maneuvers and emergency measures to meet spending. Treasury Secretary Janet L. Yellen estimates that those resources will run out around Oct. 18, even as the bills keep pouring in.
Money will still flow into treasury coffers every day, mostly from taxes. However, this money will not be enough to cover daily federal expenses, according to an analysis by the Bipartisan Policy Center.
According to estimates from the Bipartisan Policy Center, the Treasury will only bring in enough money to pay about 60% of its expenses in the first week of default, leaving difficult questions about which bills will be paid and which will not. will not.
Here are some of the biggest expenses the country may not be able to pay if the Treasury runs out of reserves by October 18:
It is unclear what the Treasury would do if the debt ceiling was not raised by October 18.
“The Treasury Department could probably prioritize some payments over others,” said Rachel Snyderman, associate director of economic policy at the Bipartisan Policy Center. “But that would force the department to choose from hundreds of millions of monthly payments, and it could face immediate operational and legal hurdles.”
The debt ceiling will eventually be raised, allowing the Treasury to pay late bills. But by then, the damage to the global economy could already be done. At present, foreign investors are hoping that loans in the United States will be repaid on time. If the federal government misses a payment on these loans, it will become more expensive for the country to borrow money. This could affect the economy, potentially triggering a recession and increasing the costs of consumer loans such as mortgages, credit cards and car loans.
With no clear plan from Congress and a potential default just days away, the Treasury could soon be faced with tough decisions on obligations, including Social Security payments, interest payments and salaries. soldiers, to be honored.