What happens when the debt ceiling isn't raised

needs to be spelled out clearly to voters. Very clearly. I don't fully get it myself. I assume if you don't raise it, people and countries will pull out of Treasury bonds because they will no longer be as safe an investment. If that happens, interest rates go up very quickly to lure people back in, because it is through treasury bonds that we finance the government when taxes aren't enough, which clearly they are not. Higher interest rates will lure people back in to investing in treasuries but also choke the very fragile economy. Most Americans, if they have investments or retirement savings, have at least some money in Treasuries either through pension funds or money market funds or other things. I don't know how not raising the debt ceiling will impact them. Can anyone here spell it all out, step by step? I think clarity here is essential and should be put out there loud and clear. My guess is that very few really understand what it means other than the "catastrophe" that Democrats are predicting. Details would make it seem far more threatening and perhaps elicit far more caution.

to repay the money it's borrowing and/or has borrowed. Defaulting on loans. Not even paying interest. And the Treasury has been paying our bills on borrowed money more than the money it takes in from the IRS. And no money from creditors means a lot of stuff here won't be paid for. Like any expenditure from a federal agency. Like keeping veterans' hospitals open. Salaries for federal employees. Light bills in Congress. Paying military contractors and Halliburton. Etc. Etc. Etc. The country could be frozen via its economy.

And please note: raising the Debt Ceiling is necessary for the expenditures that Congress PREVIOUSLY APPROVED and wouldn't cut from its budget.

So? We don't...

The minute we stop paying, we don't.

But of course, liberals and imaginary socialists will still get the blame.

and pay off the Chinese with it. Then they will say they have no money for Social Security or Medicare.

However the US government will not default under any circumstance.

If the debt ceiling is not raised before the limit is reached and after the Treasury has run through it's "extraordinary measures," there would have to be a partial government shutdown, but tax revenues would be able to cover debt service payments and essential government operations. Not a good scenario for sure, but I don't see how a default is even possible.

It's possible that the bond markets could get nervous and demand higher interest rates during such a slow dance on the debt ceiling, but this really hasn't been the case in wrangles like this historically, and would still be a far cry from a default.

The administration has a lot of flexibility.

If they want they can stop paying investors which would do a lot of what you say. I don't see this happening at this point.

They could also cut services and live up to all debt obligations. This could actually help with investors. Even though it's only temporary, investors may think the US is willing to cut services to pay the debt.

They can delay accounts payable and salary checks. Part of the plan to get to August is to stop paying into a number of union pension funds.

I'd guess they will pick the services that will make the biggest news story without a lot of harm and cut them. For example, the non-Pell grant part of education is over $30 billion. They could take $5 billion and claim the republicans are hurting education. It would put a lot of pressure on local and state education programs but they can mostly get by until the debt ceiling is raised. The dept of education would prioritize what they do have to keep the worst needs funded. They'll close parks and museums. Not a huge savings but will affect a lot of people with summer vacation plans. They can stop some infrastructure projects but will be questioned about their "laser-like focus on jobs" if they do too much.
I think it would be smart to cut war funding. Then they'd get republicans arguing to raise the ceiling although it would cause the argument that "they hate the soldiers". Instead I expect them to cut social programs, delay payments on anything they can "fix" later like pensions.

It was posted to HERE at DU, and the full article is at the link they provide.

PB

Well it depends if it leads to a default by Uncle Sam. If/when it becomes clear that a default will happen, absolute chaos in the financial markets will ensue.

I think our TV spokespeople should be as clear as possible on this issue so it doesn't just sound like the usual hyperbole that we have all become immune to. It also occurred to me that if Treasuries go down in value because less people will buy them, then all of the funds that include treasuries will go way down in value. People will lose value in their savings and their retirement. Even if we manage to pay our debts by robbing Peter to pay Paul, so to speak, I would think the whole investment structure would be hugely degraded.