What happens if congress blows the debt ceiling

How much of a problem is that? Also Included in. Tags in this Story. Share this Story. Latest Episodes From Our Shows. Read More. The US government would be forced to finance its debt obligations with whatever cash it has on hand. After it burns through that, the government would likely default on its remaining debts. Here's a wonky idea resurfacing in the debt ceiling debate: The US Treasury will only default if it doesn't have money to pay its debt, so why not mint a trillion-dollar coin made of platinum, pay all the US' debts and call it a day?

The idea of the trillion-dollar coin emerged in debt ceiling battles during Barack Obama's presidency, and while talk of the idea went silent for a number of years, it's returned during the current debt ceiling crisis. The idea stems from the Coinage Act , which prescribes limits on how many gold, silver and copper coins the US Treasury can circulate at one time.

But according to subsection k of the act, there isn't a limit on how many platinum coins it can circulate, nor does the act prescribe limits on the value those coins can be minted at. If the US government minted such a coin, it could wipe out its debt swiftly, nullifying the debt ceiling issue in the process. But this is a completely theoretical idea, and not something worked out by experts.

Yellen said on CNBC that she opposes the idea of the trillion-dollar coin, calling it "a gimmick" and reasserting that "it's necessary for Congress to show that the world can count on America paying its debt. The impact would be acute and widespread. Millions of Americans wouldn't receive Social Security or Medicare benefits. The federal government would stop issuing paychecks for all US troops and federal employees, and only certain essential federal employees would be allowed to work.

According to a report published by Moody's Analytics , US GDP would decline, approximately 6 million jobs would be lost, and the unemployment rate would increase dramatically. And, just as significantly, the country's track record, at least as far as paying its debts is concerned, would be irrevocably stained.

As with so many catastrophes, the economically disadvantaged would be disproportionately affected. Food assistance benefits would stop nationwide, monthly child tax credits would be delayed and compensation for veterans and pension payments would lapse.

The reasons against it are simpler. That's a hard number to choke down, and it's getting larger every second. A true and complicated mess. The debt limit is one of four big spending measures that are all tangled up together on Capitol Hill. These also include a bipartsan infrastructure bill that's needed to unlock a much larger Democrats-only spending bill. Progressive Democrats in the House are fuming at moderates in the Senate who won't yet buy into the larger bill. Republicans haven't offered the support needed to pass the bipartisan bill.

Opposed to debt, just fine with spending. Republicans might buy into that bipartisan infrastructure bill, but they have settled on a party line that Democrats are in the majority and can raise the debt limit on their own. But Republicans are also forcing Democrats to use a budget process that's been manipulated out of all recognition to get any of this done. Government spending vs. There's also a more immediate issue, which is a so-called partial and surely temporary government shutdown that would be triggered if lawmakers can't agree to extend funding for the entire federal government past September 30, when it's set to run out.

But shutdowns have happened before, and they can be resolved quickly. The threat of a US default, which is what will happen if lawmakers can't agree on acting on the debt ceiling by October 18, is scarier by magnitudes because they've never been stupid or stubborn enough to risk it.

What will happen, procedurally, is that the Treasury Department will have to decide what bills it pays quickly and which ones it lets slide. But this is also a big deal because the US is supposed to be a risk-free investment. US debt is the "benchmark for the entire world," said Mark Zandi, the chief economist for Moody's Analytics. The world has faith in the US because they get principal and interest on time. It's the benchmark for the entire world.

If that confidence is shaken -- if they don't get paid on time even briefly -- that means they're going to demand a much higher interest rate to compensate for that risk. The debate over the debt limit — often called the debt ceiling — is heating up again on Capitol Hill. But government officials, business leaders and economists are raising the alarms, saying not addressing it in a timely manner would be disastrous.

The limit is the maximum amount the United States is allowed to borrow to pay its debts. If the amount of government debt hits that limit, and doesn't lift the ceiling, the U. When Congress raises or suspends the debt limit, it's not greenlighting new spending — instead, it allows the Treasury to pay for spending it already approved. The U. Prior to that, lawmakers had to approve every issuance of debt separately.

The national debt ceiling has been raised or suspended more than times since then, according to the Committee for a Responsible Federal Budget. The debt limit was most recently addressed under President Donald Trump, when Congress passed bipartisan legislation that suspended it for two years. When the suspension expired, the Treasury Department began using so-called "extraordinary measures" to keep paying its bills.