The policy discordance within the Trump administration should freak you out. Both the Congressional Budget Office (CBO) and the Bipartisan Policy Center (BPC) warn that if the legal limit on federal borrowing is not lifted sometime in early to mid-October, Uncle Sam might not have enough money on hand to pay all of its bills when they are due. The full faith and credit of the United States hangs in the balance.
And don’t think for a minute that the fallout from not raising the debt ceiling will not impact Americans from sea to shining sea. As we get closer to financial doomsday, the BPC undoubtedly will do what it did when we went through this avoidable nonsense back in 2011 and 2015. It put out these handy and terrifying charts that show the daily impact of U.S. default for every day the borrowing limit is not increased. Anyone who gets any kind of check from the federal government (think veterans, retirees) could get an IOU instead. Interest rates on mortgages and other loans could spike. Nations could turn away from the dollar as the reserve currency of the world. The United States would be like that bunny trying to outrun that avalanche in Russia we’ve seen on the Web. Perhaps not as successfully.
Are you freaked out yet? I was — until Shai Akabas, director of fiscal policy at BPC, told me not to freak out just yet.
“We’ve seen this show before. The unfortunate pattern is that negotiations usually don’t get serious until much closer to the projected X Date,” Akabas said, referring to the estimated date when the treasury will be unable to pay its bills on time and in full. “Based on recent history, I would have been more surprised if they had emerged with the outline of a deal at this stage.”