Is the Government Looking at Another Debt Ceiling Increase?Legal Compliance Resource
October 9, 2013 — 865 views
Jacob J. Lew, Treasury Secretary of the country, is already warning Congress of an impending danger. Lew said that Congress does not have any more time to wait for passing the debt-ceiling increase. He said that it needs to be passed by October 17, 2013. In case this does not happen, the U.S will stand at the risk of getting dangerously low on cash. Not just that, it will also risk itself at defaulting on its major payments.
Tough Time for the Country
Lew recently said that Congress is playing with fire and the chances are that it will end up burning its hands. He warned that on October 17th, the nation will run out of its ability to borrow. He further cautioned that if the debt limit is not extended anytime soon, the country will have to face major consequences.
Lew added that if the government does not choose to pay all its bills in the given time, it will end up in default. The country has no other option that will help in getting it out of the default list if it does not have enough money to make its payments. In case, the nation chooses not to make the payments, it will be for the first time ever that the country will be doing so.
According to Lew’s projection, the country will end up exhausting its ‘extraordinary measures’ to be able to remain under the deferral debt limit of $16.7 trillion. By October 17th, it will have around $30 billion of cash. This amount will fall short as the expenditure in the subsequent days is expected to go up to $60 billion.
A shut down of a week is likely to shave 0.1 percentage point from the growth of the economy. In case the closure continues, the damage can grow much higher. The shutdown will cost a minimum of $300 million per day in lost output.
Consequences May not be Pleasant
Lew further read out a report which has suggested that this sort of strategy is not good for the economy. Breach of debt limit can end up freezing the whole credit market. Apart from that, it can result in the weakening of the dollar, push up the interest rates in the country, and even reverberate on other markets in the world. It can even result in a similar crisis that took place in 2008.