No one knows exactly what will happen if the United States passes the deadline for raising the debt limit on Oct. 17. That includes the Treasury Department, which calls a possible breach economically “catastrophic.” But that characterization is not stopping 39 percent of Americans from thinking that there’s nothing major to fear.
That fact alone should be terrifying.
A new poll from Pew shows that, while 47 percent of Americans think raising the debt ceiling is “absolutely essential to avoid crisis,” 54 percent of Republicans, 28 percent of Democrats, and 38 percent of independents think the U.S. can go past the deadline “without major problems.” Just 36 percent of Republicans think raising the limit is crucial.
The 39 percent of Americans who think exceeding the deadline would be no big deal are likely very, very wrong. For now, the Treasury has set the deadline at Oct. 17. After that point, the government will just have $30 billion cash-on-hand to meet its obligations. By Nov. 1, those obligations would include $18 billion in Medicare payments, $25 billion in Social Security payments, and $12 billion in military payments.
Failing to make those payments alone sounds really, really bad. But this wouldn’t just impact the people reliant on government money. Per BloombergBusinessWeek:
Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar, and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders, and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.
Another way of looking at the impact on the global economy, as they put it, is as an immediate economic crisis that’s, at a minimum, way larger than anything faced in the fall of 2008.
But as long as a sizable number of Americans — and a majority of Republicans — view default as something less than toxic, the possibility of default remains.