How the government pays its debt
Large swaths of the global financial system are structured around the idea that U.S. debt is the safest in the world. If that assumption was ever called into question, chaos would ensue. This is the central problem of breaching the debt-ceiling.
If the debt ceiling is increased, the government will have enough money to pay its debt obligations that are due between Oct. 18 and Nov. 15.
Taxes and borrowing are the two main sources of U.S. Government revenue. Taxes currently provide about 80 percent of the revenue needed to cover spending, while the rest is borrowed.
Determines the levels of spending in each agency through the laws it passes. Congress also determines how high taxes are and how much the Treasury department can borrow.
Treasury's computers make sure the figures are correct and then authorize the payment. This is all done automatically, dozens of times per second.
The Treasury Department typically receives around two million invoices a day from various agencies, vendors and contractors. On any single day, these payments can be enormous: on Oct. 23, Treasury authorized $12 billion to cover Social Security benefits.
If Congress fails to lift the debt ceiling, Treasury will no longer be allowed to borrow money to cover the spending that Congress has approved.
If Congress fails to raise the
debt ceiling, borrowing stops.
If the debt ceiling is not increased, Treasury will be about $106 billion short of the amount needed to pay nearly 100 million bills — totaling $328 billion — due from Oct. 18 to Nov. 15. Officials say they will be unable to prioritize payments over others and some of the bills will go unpaid, raising the possibility of a default.
Correction: The graphic previously said that the Treasury authorized $12 billion to cover Social Security benefits on Nov. 1. The Treasury authorized $12 billion on Oct. 23.
Note: The amount of cash that Treasury has available to pay its bills during this period would also be affected by changes in intragovernmental debt, such as government trust funds. “Revenues” may deviate slightly from the actual amount that the government is projected to collect over this period.
Sources: Bipartisan Policy Center, staff reports.