- If Congress doesn’t raise the debt ceiling, the U.S. could run out of funds by August, triggering delayed payments and possible default.
- A default would shake investor confidence, drive up interest rates, and hurt job growth, both domestically and globally.
- Even a short disruption could cut millions of jobs, raise borrowing costs, and erase trillions in household wealth.
Concerns over the U.S. debt ceiling are heating up again. Treasury Secretary Scott Bessent has warned that the government could run out of money by August unless Congress acts. With the temporary relief from the 2023 debt ceiling deal now expired, the pressure is back. President Trump has signaled support for raising the limit, but time is short.
The debt ceiling is a self-imposed cap on how much the federal government can borrow to meet obligations already approved by Congress. Hitting that cap doesn’t mean no new spending, it just means the Treasury can’t pay the bills without congressional approval to issue more debt.
If the ceiling isn’t raised or suspended soon, the U.S. could technically default – meaning not pay the interest on it’s Treasury Bills, something that has never happened in history.
Why This Matters For Everyone
Treasury bills and notes are regarded as one of the safest investments in the world. Though they’ve been downgraded a bit in recent years, the U.S. government has never missed a payment.
If it were to miss a payment, the results to the financial markets (and to millions of individuals and businesses) would be serious.
1. Global confidence would take a hit. U.S. government debt is used as a benchmark for safe investing around the world. Even a brief default would raise doubts about reliability.
2. Borrowing costs would jump. Interest rates for everything from credit cards to mortgages could spike as lenders demand higher premiums for perceived risk.
3. Jobs and markets would feel it fast. Moody’s Analytics estimates that even a short default could wipe out 1.5 million U.S. jobs and erase trillions from the stock market.
How A U.S. Default Would Unfold
The Treasury Department would likely prioritize payments to bondholders to avoid immediate fallout in global markets. But that would mean delayed payments for Social Security recipients, veterans, and federal workers. Lawsuits from those unpaid groups would follow. Ratings agencies would almost certainly downgrade U.S. credit.
A brief default could still do lasting damage. In 2011, even coming close to the edge resulted in a credit downgrade and higher borrowing costs for years.
If the situation drags into weeks or months, the effects become more severe. The Congressional Budget Office estimates up to 7.8 million jobs could be lost. The unemployment rate could rise to 8%. And a stock market selloff could wipe out as much as $10 trillion in household wealth – that’s a roughly 20% decline over current valuations.
What Happens Next
Raising the debt ceiling used to be a routine vote. But over the last two decades, it’s become a political tool. Lawmakers have tied it to negotiations over federal spending and other policies.
In 2023, the “Fiscal Responsibility Act” gave temporary relief by suspending the ceiling. But that deal expired on January 1, 2025. Since then, the Treasury has been using short-term moves known as “extraordinary measures” to keep paying bills. That wiggle room will run out by August, according to the latest estimates.
House Republicans are pushing for spending cuts in exchange for lifting the limit. And while talks are happening, there’s no guarantee of resolution before Congress goes on summer recess.
If Congress doesn’t act, the Treasury will likely prioritize debt payments to maintain credit market access. But all other payments, from military salaries to Medicare reimbursements, could face delays.
While the U.S. has flirted with default before, it’s always avoided the worst-case outcome. That history of last-minute deals is what keeps global markets from panicking immediately.
Don’t Miss These Other Stories:
25 Secret Websites To Make Money
14 Best Side Hustles For Men
Best Options Trading Platforms In 2025
Create your very own Auto Publish News/Blog Site and Earn Passive Income in Just 4 Easy Steps
