If congress does not raise the debt ceiling, the U.S. will default on its national debt by September, according to Bipartisan Policy Center, a think tank.
According to The Washington Post, the BPC reported that the Treasury could change the borrowing limit because the tax revenue brought in this year was much lower than expected. As of now, the government is spending more money than they are bringing in, and the difference is covered with borrowed money. The money is borrowed by issuing debt, but this can only happen up to a limit that Congress sets.
If lawmakers take BPC’s warning seriously, they may have to rush to raise the borrowing limit before they break in August.
“That could change the dynamic,” said Senate Appropriations Chairman Richard C. Shelby. “We cannot default. That would send chaos through the financial markets."
BPC senior vice president G. William Hoagland said that tax revenue, especially from corporations, has fallen far behind projections, leaving the senate with much less cash. Now, Congress might be forced to raise the debt ceiling, something it has never done. Yet not doing so could mean a stock market crash and skyrocketing interest rates.
BPC says that there is a “significant” chance that the government will be out of money by the beginning of September, it is more likely that it would run out sometime in October. If the Treasury can hold steady through September, it will receive billions in taxes, which would be a huge relief to the money issues.
BPC pointed out two risks of not raising the debt ceiling. The first risk could lead to millions of Americans losing benefits. This would mostly impact elderly Americans, but the second risk, a stock market crash, could hurt all Americans.
Read the full story here.