The purpose of this analysis is to shed light on the operation of the debt limit in case Congress does not raise the limit before the federal government runs short of cash and is no longer able to meet all of its obligations.
In particular, we have addressed three questions:
- What is the date past which the government will be unable to honor all obligations?
- If that date is passed without a debt limit increase, what will be the effect on federal spending?
- If that date is passed without a debt limit increase, what are the potential consequences in the market for Treasury securities, as well as in other markets and in the broader economy?
Please note that the analysis has been updated to reflect recent Treasury data. The daily outlook has been extended through the end of August and a new “layers of defense” slide has been added. Additional information about August securities has also been updated.
Read in your web browser below:
Try It Yourself
The federal government has an estimated $306.7 billion in payment obligations for August 2011 after the 2nd of the month. The U.S. will take in $172.4 billion in revenue from August 3 to 31, 2011. Check out the following tools to make the difficult choices that would prioritize programs and balance the books:
- Bloomberg Government’s Debt-Limit Bubble tool
- PBS NewsHour’s Daily U.S. Government Income and Expenditures tool
- The Washington Post’s You choose: who gets paid (and who doesn’t) tool
- Read the press release here.
- Read “Real implications of debt debate” by Jerome Powell in POLITICO.
- Read “Will Social Security be paid?” by Jerome Powell in POLITICO.
- Read “Nation in fiscal crisis faces only tough choices” by Jerome Powell and Steve Bell in The Hill.
- Watch Jerome Powell’s recent television interviews here.
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