July 21st, 2011
01:30 PM ET

Debt ceiling: What happens if Congress doesn't raise it?

NEW YORK (CNNMoney) - What happens if lawmakers fail to raise the debt ceiling by the Aug. 2 deadline?

Well, it's hard to say, because lawmakers have never before put the United States in a position where it can't pay all its bills.

But it wouldn't be pretty. A failure to raise the debt ceiling would likely send shockwaves through the underpinnings of the financial system - and possibly ripple out to individual investors and consumers.

The federal government would be forced to prioritize its payments. It would risk defaulting on its financial obligations. And if that happens, credit rating agencies would downgrade U.S. debt.

"Even if Washington did raise the debt ceiling after just a few harrowing days following a default ... we envisage that the economy could fall quickly back into recession," rating agency Standard & Poor's said in a report Thursday.

Federal Reserve Chairman Ben Bernanke said the fallout could be "catastrophic" and "self defeating."

FULL STORY on CNNMoney.com

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soundoff (One Response)
  1. Becky

    This is no way to run a household, let alone a country. Congress needs to do their job & represent the people. Money doesn't fix money problems. Raising the debt ceiling & postponing any meaningful solution is just a patch & will put us, the USA in a deeper hole to try to climb out of later. Cut the non-essential programs & get this deal done now. No more blank checks. Live within our means. It's a joke to think that if Congress takes a break, that they will be able to get a bipartisan deal in 6 months. They haven't been able to get anything done since January.

    July 21, 2011 at 11:36 pm |