What’s going to happen Oct. 18 if Congress doesn’t vote to increase the debt limit?
Probably nothing.
If necessary, the Administration will probably find ways to put off financial catastrophe.
Oct. 18 found its way into the public debate after Treasury Secretary Jack Lew warned Congress that he expected to have only about $30 billion in cash available by then. After that, he said he could not promise to make all scheduled government payments.
The government may be about to lose borrowing authority. But that doesn’t mean it will immediately be unable to pay its bills.
Government raises money by borrowing and by collecting taxes and other revenues. Even after its borrowing authority is exhausted, it will continue to collect taxes. It may also have some limited additional flexibility to shift money among accounts.
It turns out the green eyeshade folks can identify projected daily spending quite precisely. They know, for instance, that Social Security must pay $12 billion in benefits on Oct. 23 and that Treasury owes $6 billion in interest on the public debt on Oct. 31. They also know the government must pay out more than $55 billion on Nov. 1.
Thus, the drop-dead date may not be Oct. 18.
This may create a serious credibility problem for President Obama. If Congress does not act in time, his critics will note with some glee that the sun still rose on Friday morning and Treasury still paid its bills.
http://www.forbes.com/sites/beltway/2013/10/15/u-s-may-not-actually-default-friday-but-that-doesnt-mean-washington-has-wiggle-room/2/
