The full consequences of a default are unknowable, but no responsible leader should want to find out by conducting the first experiment. Short-term interest rates could spike, creating higher borrowing costs for our nation and for millions of families and small businesses. Treasury could lose the ability to disburse payments like Social Security benefits or paychecks for armed forces servicemembers. Stock prices could fall, threatening retirement security for older Americans, and market disruptions could lead to widespread job losses and increased risk of recession. Default could also undermine confidence in the US dollar and financial system, from which our nation draws great strength and power, presenting a grave risk at a time of intensifying geopolitical competition.
And the risk of an accidental default is very real. Congress may want to know precisely the last possible moment to act, but forecasting Treasury’s inflows and outflows is difficult even under the best circumstances. Daily cash needs are always highly variable — but especially challenging in the current environment as we emerge from an economic crisis. Rapidly changing economic conditions make estimating tax receipts tricky, and outflows for Covid response loans and grants can be similarly unpredictable.
The time is long overdue to reform the way we manage the debt limit. With a stopgap measure almost in place to address the urgent need to avert an imminent crisis, Congress should now act as quickly as possible to remove the threat of another manufactured crisis in a few weeks. For more than two centuries, our nation has paid all its bills on time. It would be a tragic mistake to break that record which contributes so much to our economic and national security.