Unless Congress votes to increase the amount of money the U.S. Treasury is allowed to borrow above its current debt of $28.5 trillion, the United States will default on its financial obligations sometime in the next several weeks, experts warn.
Few experts consider that likely to happen, but if it did, it could trigger an economic catastrophe with effects far beyond America's shores.
In a letter to members of Congress last week, Treasury Secretary Janet Yellen warned of the damage that would result if the U.S. is unable, even for a short time, to pay its bills.
"A delay that calls into question the federal government's ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets," wrote Yellen, the former chair of the Federal Reserve Board. "At a time when American families, communities, and businesses are still suffering from the effects of the ongoing global pandemic, it would be particularly irresponsible to put the full faith and credit of the United States at risk."
With that crisis looming, Democrats and Republicans in Washington are battling over who should take responsibility for the politically unpopular task of raising the cap on borrowing, commonly known as the debt limit. Republicans, led by Senate Minority Leader Mitch McConnell, have vowed that not a single one of them will vote to raise the limit.
As of September 20th, Business Insider reports that Mitch McConnell says the GOP will vote for the US to default on its debt:
"We will not support legislation that raises the debt limit," McConnell said after Pelosi and Schumer's announcement. "Democrats do not need our help."
It is currently unclear when exactly the US would become unable to meet its obligations; Treasury Secretary Janet Yellen has said only that the Treasury will run out of cash “sometime in October.”
Will the U.S. default on its debt before 1 November 2021?
This question resolves positively if, before 00:00 Eastern on 1 November 2021, the US Treasury announces that the US has defaulted on any of its sovereign debt obligations, or if any of the three major credit ratings agencies (Standard & Poors, Fitch, or Moody's) announce that the US has entered default (including selective or restricted default) on any of its sovereign debt obligations, or if any two of the following media organizations announce that the US has defaulted on any of its sovereign debt obligations:
- BBC News
- ABC News
- CBS News
- Wall Street Journal
- Financial Times