Unless Congress raises the country’s borrowing limit, the government will run out of cash to pay its bills no later than October 17, putting the country at imminent risk of default, the Treasury Department said.
The announcement of the deadline ramps up the pressure on lawmakers who are currently struggling to pass a short-term budget in the next six days to avoid a government shutdown. They are similarly at odds over the debt ceiling, but economists warn that breaching the debt limit would do much greater damage than a shutdown.
Given Congress’s ongoing deadlock over the short-term budget, there is no clear political path to raising the debt ceiling. That’s fueled fears of a default on Treasury debt—a virtually unprecedented event that’s expected to have devastating financial and economic consequences. Markets here and abroad would tank. Bondholders would demand higher interest rates for holding U.S. debt, which would raise borrowing costs for governments, businesses, and prospective homebuyers.
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