Treasury Secretary Timothy Geithner announced on May 16 that the federal government had reached its borrowing limit. With the $14,294,000,000,000 cap on debt imposed by Congress firmly in place, the Treasury began a series of "extraordinary" measures designed to stave off a potential government default until August 2.
On May 31 the House voted 97-318 to reject a bill to allow a $2.4 trillion hike in the nation’s debt limit without accompanying spending cuts. If Congress fails to raise the debt limit by August 2, the Treasury has only two options: It can default on its debt—meaning, stop paying its creditors around the world—or continue to pay creditors but halt any other federal spending above what the government collects in taxes. In effect, that would mean an overnight spending cut of about 40 percent.
Here are six consequences if the Treasury is forced to choose one of those options: