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Debt Limit Breach Could Trigger Default Sooner Than Expected

Talking Points Memo

Tuesday, January 8, 2013

A new report by the Bipartisan Policy Center explains some of the difficulties the Treasury Department would face if it runs out of borrowing authority, and suddenly lacks the funds it needs to meet all of the government obligations. The obstacles would be daunting — huge technical challenges stemming from computer systems designed to make payments automatically, legal questions about the administration’s authority to prioritize payments to creditors, and so on…

According to BPC, the government is expected to exhaust its borrowing authority no earlier than Feb. 15. In all likelihood, it won’t reach the breaking point until a few days after the 15th. But on the 15th, and some future dates, the Treasury will owe more in debt service than it collects in revenues

On days like that, avoiding a default will be even more difficult, if not impossible.

2013-01-08 00:00:00
Talking Points Memo