Americans Don’t Get How Bad Hitting the Debt Ceiling Would Be

Nearly 40 percent of Americans think the U.S. could go past the debt limit deadline without major problems. They are likely wrong.

A wildfire-induced tornado of hot ash dances across a ridgetop as the sun sets May 13, 2002 near Rancho Santa Margarita, CA. 
National Journal
Matt Berman
See more stories about...
Matt Berman
Oct. 7, 2013, 12:25 p.m.

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.

What We're Following See More »
Romney Talks Cost of His Futile Anti-Trump Fight
25 minutes ago

Mitt Romney spoke in an interview with the Wall Street Journal about his decision to challenge Donald Trump. “Friends warned me, ‘Don’t speak out, stay out of the fray,’ because criticizing Mr. Trump will only help him by giving him someone else to attack. They were right. I became his next target, and the incoming attacks have been constant and brutal.” Still, "I wanted my grandkids to see that I simply couldn’t ignore what Mr. Trump was saying and doing, which revealed a character and temperament unfit for the leader of the free world.”

Puerto Rico Relief Stalled on the Hill
1 hours ago

"A bill to help Puerto Rico handle its $70 billion debt crisis is facing an uncertain future in the Senate. No Senate Democrats have endorsed a bill backed by House Speaker Paul Ryan and Minority Leader Nancy Pelosi, while some are actively fighting it. ... On the Republican side, senators say they’re hopeful to pass a bill but don’t know if they can support the current legislation — which is expected to win House approval given its backing from leaders in that chamber."

Congress Slow-walking Zika Legislation
2 hours ago

"Congress abandoned the Capitol Thursday for an almost two-week break without addressing how to combat Zika, even as public health officials issue dire warnings about the spread of the mosquito-driven virus with summer approaching. ... Instead of racing to fund efforts to thwart a potential health crisis, lawmakers are treating the Zika debate like regular legislation, approving Thursday the establishment of a House-Senate committee to hammer out differences in their competing bills."

Trump to Rubio: Run for Reelection
5 hours ago

Donald Trump may have defeated Sen. Marco Rubio's presidential ambitions, but he wants the man he dubbed Little Marco to keep his job in the Senate. "Poll data shows that @marcorubio does by far the best in holding onto his Senate seat in Florida," Trump tweeted Thursday evening. "Important to keep the MAJORITY. Run Marco!" Trump is not the first to urge Rubio to run, though the senator has said such a move is unlikely. The filing deadline is June 24. 

At Hiroshima, Obama Calls For Nuke-Free World
5 hours ago

President Obama called for an end to nuclear weapons Friday during a somber visit to Hiroshima Peace Park in Japan, where the United States dropped the first atomic bomb 71 years ago. "That is the future we can choose,” Obama said. “A future in which Hiroshima and Nagasaki are known not for the bomb of atomic warfare but as the start of our own moral awakening.”