What Happens If Congress Doesn't Raise The Debt Ceiling?

Transcript

ARI SHAPIRO, HOST:

Here's a way to think about the U.S. debt ceiling. In just over a week, the federal government may have to cut up its credit card. Treasury secretary Jack Lew warns that the government has nearly exhausted its borrowing authority, and unless Congress acts, the government won't be able to borrow additional money after next Tuesday. Aides say members of Congress are closing in on a budget deal which would include a debt limit increase. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: The Treasury secretary made his latest appeal to lawmakers today in an op-ed column for USA Today. Without a hike in the debt ceiling, he warns, the government won't be able to pay the bills it's already run up, including military salaries, veterans' benefits and Social Security checks. Lew told CNBC even toying with such a possibility is dangerous.

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JACK LEW: Any time you wait till the last possible minute, you're inviting a risk. And this is not a last minute that we can know with absolute certainty. I worry every time we hit this that some time, there could be an accident, and that would be terrible.

HORSLEY: Lew's already been forced to move up the deadline more than once thanks to lower-than-expected tax revenues and higher-than-expected expenses. He says that kind of volatility would be especially problematic if the government suddenly had to live with only the cash it has on hand.

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LEW: Think about it. We have a government in the United States - a $4 trillion-a-year enterprise - where swings of a few billion dollars can determine whether or not you have enough cash to pay your bills. It's ridiculous.

HORSLEY: Even if lawmakers don't raise the debt limit by next Tuesday, the government probably wouldn't default right away. Forecasters estimate there would still be around $30 billion in federal coffers. That's probably enough to make payroll for federal workers a week from Friday and maybe enough to cut Social Security checks on November the 10, though it's hard to know for sure.

SHAI AKABAS: I always like to say this is really more of an art than a science.

HORSLEY: Shai Akabas of the Bipartisan Policy Center says the real test could come November 16 when the government is supposed to make some $30 billion in interest payments. He predicts if the debt ceiling's not increased, the government will run out of cash somewhere between November 10 and 19. Though he says pinpointing that moment is not easy.

AKABAS: These are millions and millions of payments that are going out every single day. So this is really quite a sum for Treasury to be managing in a situation where they're in uncharted waters and unable to borrow from the public.

HORSLEY: The Moody's credit rating agency issued a report today saying even if Congress fails to raise the debt limit, the government would likely continue to pay interest on its debt while postponing other payments such as federal workers' salaries. The administration has repeatedly dismissed that idea, and Akabas says it understates the risk in lost confidence and higher borrowing costs. So what really happens on the day the government doesn't have the money it needs to pay all of its bills?

AKABAS: That's a great question, and the true answer is that we don't know because we really never encountered that in modern America.

HORSLEY: Treasury Secretary Lew hopes this is not the year we find out. Scott Horsley, NPR News, the White House. Transcript provided by NPR, Copyright NPR.