Politics

The consequences if debt ceiling deal can't be reached

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Speaker John Boehner with House Republicans. (Photo: speaker.gov)

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Despite plenty of drama and public rhetoric in the battle over the U.S. debt ceiling, President Obama and House Speaker John Boehner have not yet reached a compromise. The deadline is looming as is the possibility the country will have to default on its $14.3 trillion of debt.

As time marches on, analysts are starting to think seriously about what would happen if no deal can be reached.

Louise Story, Wall Street and financial reporter for The New York Times, talked about the government's budget gap on The Takeaway: "Throughout all of August, the government has to write 80 million checks and those checks are worth $362 billion dollars. The problem is in August they'll only bring in $200 billion dollars."

If the debt ceiling isn't raised, Story says, the government will not be able to borrow the $162 billion needed to cover its bills. This means it may not be able to pay for things like federal salary and benefits, military active pay and educational grants. According to The New York Times, the Treasury Department considers this a "default by another name."  

A default would have global consequences, according to the International Monetary Fund. At a press conference yesterday, Christine Lagarde, head of the IMF, called a default a "very serious event, not just for the U.S., but the global economy at large."

A vote was expected today in the House on Boehner's last bid to increase the debt limit and cut spending, but that all fell apart last night when Tea Party Republicans refused to vote for it.

More on U.S. debt debates:
> IMF Chief Warns of Global Consequences of US Default
> Q&A on the Debt Ceiling

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"The Takeaway" is a national morning news program, delivering the news and analysis you need to catch up, start your day, and prepare for what's ahead. The show is a co-production of WNYC and PRI, in editorial collaboration with the BBC, The New York Times Radio, and WGBH.