The Common Good

What Could Happen If US Defaults?

Source: Gulf News
Date: October 16, 2013

Reverend Jim Wallis (centre) leads a prayer in front of the Capitol Building yesterday in Washington, DC. Yesterday marked the 16th day of government shutdown and the last day to a solution before government could potentially begin defaulting on debts.

New York: The prospect of a US debt default has unnerved investors, corporate executives and foreign leaders.

What’s so troubling about Congress failing to raise the nation’s debt ceiling by Thursday? Here are basic facts about the debt ceiling and the potential consequences of a default.

What is the debt ceiling?

The debt ceiling is a borrowing limit, similar to the spending cap on a credit card.

It places a lid on how much the United States can borrow by selling Treasury bonds. The federal government routinely spends more than it takes in through taxes and other income, forcing the Treasury Department to sell bonds to finance routine governmental operations.