John Cassidy Prescribes a Market Crash for America’s Political Constipation
As the United States stumbles into the second week of a partial government shutdown and politicians take potshots at each other from the trenches they have dug on either side of the aisle, economic Armageddon clocks around the country are ticking away pessimistically. Here’s why: the U.S. hit its $16.7 trillion debt ceiling in May, and the Treasury has said that it will exhaust extraordinary financing measures on October 17.
If Congress fails to act by then, Uncle Sam will wake up on October 18 with $30 billion in his pocket and no authority to borrow. This means the government will have to rely on incoming tax receipts to pay its bills, and what happens next is anybody’s guess.
Defaulting on debt payments would be catastrophic, and there is a possibility that even if the debt ceiling is not increased or suspended, the Treasury would be able to service the nation’s debt with tax receipts — but Treasury Secretary Jack Lew has suggested that the department does not have the logistical capacity to prioritize payments. Even if this were possible, incoming receipts could only fund about two-thirds of current expenditures.