When the country hits the ceiling, the Treasury would stop issuing new debt and start a series of “extraordinary measures,” technical maneuvers to leave it with enough money to pay all its obligations. But such extraordinary measures would buy the government only about six to 10 weeks, analysts estimate.
Eventually, its spending obligations would overwhelm incoming receipts, and the government would not be able to pay its bills. That would leave the Treasury in the position of choosing whether to pay bondholders or soldiers, the elderly or states.
Last summer, “Treasury considered asset sales; imposing across-the-board payment reductions; various ways of attempting to prioritize payments; and various ways of delaying payments,” a department report said. “Treasury reached the same conclusion that other administrations had reached about these options — none of them could reasonably protect the full faith and credit of the U.S., the American economy, or individual citizens from very serious harm.”
Knowing exactly when the Treasury would reach that point is an exercise in guesswork. The Bipartisan Policy Center estimates the date would fall sometime in February.
If Congress failed to address any of the year-end spending cuts or tax increases, the government’s revenue would rise and spending obligations would fall. But analysts say they do not think that would delay the need to raise the debt ceiling for more than a few days.
“I’ve been here in 40 years this coming January, and I have never seen this many consequential spending and tax problems descend at the same time,” said Steve Bell, senior director of economic policy at the Bipartisan Policy Center, and a former Republican Hill staff member.
“There might be a variation of a day or two or four,” he guessed. But by sometime in March, Congress would have needed to raise the ceiling or the country might have entered another financial crisis — or even another recession.