The U.S. government technically ran out of money to meet its myriad obligations on Thursday. Everyone is still getting paid, for now, because the Treasury can use what it calls “extraordinary measures” to move government assets around and provide cash.
But by summer, if not sooner, cash will not be available to repay bondholders and other creditors for the loans that have already come due.
Nor will there be cash to pay the military, millions of other federal employees, government pensioners, the beneficiaries of Social Security, Medicare, Medicaid, or other entitlement programs. And that’s just the payroll, leaving aside all the purchases and contract work.
Congress already authorized these expenditures so Americans will still have to pay these bills but any Republican gamesmanship or hostage-taking will only hurt the credit of the United States, which was downgraded for the first time in history when GOP lawmakers refused to do their duty in 2011.
The Treasury Department has warned that if the debt limit is not raised and the U.S. runs out of money to pay its bills it could force the government into default, which would have disastrous effects on the global economy.
Experts have warned a government default could result in the loss of about 6 million jobs and an unemployment rate of nearly to nine percent. It could also wipe out $15 trillion in household wealth and cause interest rates to skyrocket.