What if debt ceiling isnt raised

This has never happened in U. If the U. Social Security payments would not go out; U. Veterans could see compensation or pension payments lapse. And millions of Americans on food assistance would see benefits stop. Our current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost. On Tuesday, financial services firm Moody's Analytics stated a default would be a "catastrophic blow" to the economic recovery, and said even if it was resolved quickly, Americans would pay for a default for generations.

Even the threat of default can have financial consequences. In August , the U. The credit agency said the downgrade reflected its view that the "effectiveness, stability, and predictability" of American policymaking and political institutions had weakened at a time of ongoing challenges.

For months, Democrats have been calling for a bipartisan approach to raising or suspending the debt ceiling. But Republicans have said Democrats would not have their support. On Monday, Democratic leaders announced they are including the debt ceiling in the stopgap spending bill to keep the government running into December. The move would suspend the debt limit through December , meaning lawmakers would not need to address it until after the midterm election.

Congress must approve any increase in the limit to the amount of money the federal government can borrow in order to pay its debts. Once the debt limit is raised, programs will receive funds and government employees and members of the military will receive paychecks.

What does it mean if Congress fails to raise the debt limit? Included in that list are programs such as Social Security, Medicare and Medicaid, plus the paychecks of 1.

The recent Child Tax Credit payments would be paused and funding for pandemic mitigation efforts would end. Grants that states receive that cover things like school programs, Medicaid and public transit would dry up. Nearly a third of state spending nationally comes from the federal government. For instance, if an individual fails to pay his or her bills, they become a credit risk, meaning it is more difficult to borrow money because creditors are not sure they will be paid back.

The same things happen when a country cannot pay its bills. Its credit rating falls and borrowing money becomes more expensive because the government will be charged a higher rate of interest on loans. If the limit is not raised, would the government prioritize who gets paid first?

When was the last time it was increased? Unless Congress addresses the debt limit by October 18 , the federal government will no longer be able to borrow to pay for its operations, forcing it to limit its spending. Although the House has twice passed measures to do so, the effort is expected to fail again in the Senate, where Republicans are united in their opposition to the bill.

Read More. Just what it would mean for Americans remains uncertain since Congress has always stepped in to raise, extend or revise the definition of the debt limit in the past. The Treasury Department could still pay some of its bills since it would still have tax revenue coming in, but it's not known what it would decide to pay and when, experts said. Read more.