If Congress has not resolved the question of the government shutdown and the debt ceiling by Wednesday evening at 11:59 EST, the United States government, for the first time in history, will be in default and will be unable to pay its obligations. According to CNN.com, October 11, 2013, this could result in an inability of the government to pay the most basic of monthly debts, including but not limited to: social security, military pay, veterans' benefits, Medicare payments, and businesses that provide good and services to the nation.
A run on U.S. Treasury bonds could occur as the holders of such bonds attempt to cash in their bonds simultaneously because of concerns over the government's ability to make good on the bonds. According to CNN.com, if such a run were to occur, the government would not even be able to meet its obligations. Investors who hold onto their Treasury bonds would demand higher interest rates since borrowing would be much more restricted, and consequently the interest rates on homes, cars, and personal loans, as well as credit cards, would skyrocket.
Short term lending would be affected adversely by the spiked interest rates on Treasury bonds. The ripple effect would be felt globally, and America's positioning in the World Market would be weakened considerably. Efforts by employers to scale back their expenses and reduce their work force also would cause high unemployment as consumer confidence declines and buying power diminishes.
Unfortunately, Congress consistently brings the government to the edge of default before facing its responsibility. This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veterans benefits. Interest rates would skyrocket, instability would occur in financial markets, and the federal deficit would soar. The United States has a special responsibility to itself and the world to meet its obligations. It means we have a well-earned reputation for reliability and credibility, two things that set us apart from much of the world."
One can only hope that a collaborative solution will be found and that the much feared government default will not happen. All eyes will be on Washington as the latest episode in this tireless saga unfolds and Congress debates the question of how to deal with the looming threat of government default. In the meantime, all members of Congress and the United States Senate are receiving their full salaries, as does the President and all members of his Cabinet.
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