The Enid News and Eagle, Enid, OK

Featured Story

October 14, 2013

Q&A: What happens if US breaks borrowing limit?

WASHINGTON — Negotiations in Congress to raise the nation's borrowing limit are up against a deadline of Thursday. If the limit isn't raised by then, the government will no longer have authority to borrow to pay its bills.

So what happens if Thursday comes and goes and the limit isn't raised?

The scary thing is, no one really knows. Going past the deadline would be unprecedented.

The possible consequences are complex. But none are good. The gravest threat is that the government would soon fail to make interest payments on its debt. Any missed payment would trigger a default.

Financial markets would sink. Social Security checks would be delayed. Eventually, the economy would almost surely slip into another financial crisis and recession.

Even if the government managed to make its interest payments, fears about a default could cause investors to dump Treasurys and send U.S. borrowing rates soaring.

Here are questions and answers about the government's borrowing limit:

Q. What exactly is it?

A. The borrowing limit is a cap on how much debt the government can accumulate to pay its bills. The government borrows in most years because its spending has long exceeded its revenue. The first borrowing limit was enacted in 1917. Since 1962, Congress has raised the borrowing limit 77 times. It now stands at $16.7 trillion.

Q. When will we reach the limit?

A. The national debt actually reached the limit in May. Since then, Treasury Secretary Jacob Lew has made accounting moves to continue financing the government without further borrowing. But Lew says those measures will be exhausted by Thursday. The government will then have to pay its bills from its cash on hand — an estimated $30 billion — and tax revenue.

Q. So what happens after Thursday?

A. The government could pay its bills for a few days. But sometime between Oct. 22 and Oct. 31, the cash on hand and tax revenue wouldn't be sufficient, according to the Congressional Budget Office. The date isn't exact because it's impossible to foresee precisely how much revenue the government will receive and when.

Text Only
Featured Story
Featured Ads
AP Video
Ariz. Inmate Dies 2 Hours After Execution Began Crash Kills Teen Pilot Seeking World Record LeBron James Sends Apology Treat to Neighbors Raw: Funeral for Man Who Died in NYPD Custody Migrants Back in Honduras After US Deports Israeli American Reservist Torn Over Return Raw: ISS Cargo Ship Launches in Kazakhstan Six Indicted in StubHub Hacking Scheme Former NTSB Official: FAA Ban 'prudent' EPA Gets Hip With Kardashian Tweet Bodies of MH17 Victims Arrive in the Netherlands Biden Decries Voting Restrictions in NAACP Talk Broncos Owner Steps Down Due to Alzheimer's US, UN Push Shuttle Diplomacy in Mideast Trump: DC Hotel Will Be Among World's Best Plane Crashes in Taiwan, Dozens Feared Dead Republicans Hold a Hearing on IRS Lost Emails Raw: Mourners Gather As MH17 Bodies Transported Robot Parking Valet Creates Stress-free Travel Raw: Fight Breaks Out in Ukraine Parliament
NDN Video
LeBron James -- Dropped $2k On Cupcake Apology ... Proceeds To Benefit Charity Snoop Dogg Says He Smoked Weed at the White House Raw: Fight Breaks Out in Ukraine Parliament Chris Pratt Interrupts Interview To French Braid Intern's Hair Shirtless Super Mario Balotelli Dances While Ironing - @TheBuzzeronFOX Whoa! Watch "Housewives" Star Do the Unthinkable LeBron apologizes to neighbors with cupcakes Justin Bieber In Calvin Klein Underwear Shoot Samsung Pre-Trolls The IPhone 6 With New Ad Jimmy Kimmel Introduces His Baby Girl Swim Daily, Nina Agdal in the Cook Islands Guilty Dog Apologizes to Baby for Stealing Her Toy Prince George Turns 1 and is Already a Trendsetter Train Collides With Semi Truck Carrying Lighter Fluid Kanye West Tells-All on Wedding in "GQ" Interview Tony Dungy Weighs in on Michael Sam Scarlett Johansson Set To Marry In August New Star Wars Episode XII X-Wing Revealed Obama: Putin must push separatists to aid MH17 probe Michigan inmates no longer allowed to wear orange due to 'OITNB'
House Ads
Facebook