The nations debt ceiling limit is fast approaching and what will happen if it is not raised? Opinions on the effect of not raising the limit vary depending on which side of the aisle you sit on (Republican/Democrat). Fundamentally the government will not be able to spend money that it does not have, borrowing will cease. The rate of borrowing by the United States is at the alarming rate of $30,000 a second. Obviously this number is unsustainable (to steal a GOP word) but how long can it possibly continue without addressing?
To service our debt the government last year spent $223 billion on interest payments on a debt of $17 trillion. With a continued budget deficit in last years budget of $901 billion (5.5% of GDP) this number would be the number to focus on. To eliminate the need for increasing the debt ceiling, Washington needs to address this number. The sequester that effectively reduced the deficit with automatic cuts took both parties off the hook politically. And more needs to be done if we are to get our house in order. But what needs to be done seems impossible considering the gridlock of Congress.
Increasing taxes or to decrease spending? Or a combination of both? No new taxes always the pledge of the GOP is not a realistic approach as cutting programs is not to Democrats. The deficit in comparison to the overall budget of $3.8 trillion is significant about 24%. These numbers indicate that both parties will have to move from their positions if we are to successfully balance our budget and send the debt ceiling fear to extinction.
If no agreement is made and we “default”, the government will not go bankrupt. Spending will be prioritized and some will be paid and others will not. Service on our debt will continue, Social Security payments will likely be made and our debt? This will stop growing at least for the short period that no deal is in place. The overall effect on our economy is unknown. To be a betting man, I would think that the stock markets would crash and “WE THE PEOPLE” will suffer yet again. Those in Washington who are representing, I would also bet that their paychecks will not be at risk.
sources: bankruptingamerica.org , Wikipedia.org , Thomas.loc.gov