Trying to demonstrate the catastrophic magnitude of a possible government default and shutdown after August 2nd, the deadline set by the Treasury Department to raise the debt ceiling and the point at which the federal government will run out of cash, President Obama yesterday said that the government sends out “70 million” checks every month. According to the Washington Post that figure is closer to 80 million checks and runs the gambit from Social Security checks to Medicare payments, salaries for members of the military to rail road pensioners, all of which could be impacted if the debt ceiling is not raised next week. The massive size and scope of government services could be fuel for either side of the deficit debate—it either demonstrates the bloated size of a federal structure that desperately needs to be shrunken or it represents the vital services that the government provides to hundreds of millions of Americans. Either way, the truth is that the affects of a default on American loans after August 2nd are still largely unknown and hard to predict. Some analysts believe the government has enough cash on hand to continue bare-bone services until about August 15, but at the same time the credit rating of American bonds is sure to sink, havoc could break out on trading markets in the U.S. and beyond and interest rates could soar. We try to imagine life under the debt ceiling if Congress and the president fail to raise the roof by next Tuesday.
Joe Davidson, “Federal Diary” columnist at the Washington Post
Jay Powell, visiting scholar at the Bipartisan Policy Center; former Under Secretary of the Treasury for Finance under President George H.W. Bush