On October 1, Treasury Secretary Jacob Lew sent a letter to Congress reiterating an increasingly urgent message: if Congress does not act to raise or suspend the statutory debt limit, the U.S. government could default on its financial obligations.
The U.S. hit its current debt ceiling of approximately $16.7 trillion in May of this year, and in order to continue paying the nation’s bills the Treasury began taking extraordinary stopgap measures. These measures are expected to run dry on October 17, at which time the Treasury will have about $30 billion on hand — enough to finance operations for a few days at best. From October 17 to November 7 alone, the U.S. government $417 billion in bonds will come due.
Even with the partial shutdown of the U.S. government stumbling into its sixth day, it’s the possibility of a default that is dominating the fiscal conversation. The U.S. has never suffered a true default on its financial obligations, and nobody knows for sure what the fallout would be — but the consensus, however nebulous, is that it would be catastrophic. Here are some of the ways in which a default could impact the economy.