The federal government could default on its debt as soon as July, a new forecast from the Bipartisan Policy Center warns, raising pressure on Congress for action.
The prominent think tank forecast Monday that the so-called “X-Date” would likely arrive between mid-July and early October.
That’s the point. You can’t add to the debt if no one is willing to lend the money (I mean it’s more complicated, but that’s the essence of it). Borrowing is going to become very expensive for us if no one trusts us to pay our debts, and it will probably trash the bond market which is where anyone nearing or after retirement probably has all of their savings.
Adding further onto your point emphasizing why this will be severe: Borrowing will become more expensive, and we can’t just stop spending to stop borrowing. Much of the current debt is in short term positions that regularly get re-issued. The cost of issuing new short term debts just to replace the current ones coming due will increase even if spending stays the same (or decreases).
And of course, there’s a huge impact to the dollar’s value internationally if major financial markets shift away from holding US debt. You know the trade deficit Republicans like to rage about … Yeah, it’ll get a lot worse when fewer people want to hold US dollars for the purpose of investing in US bonds.