Questions and Answers About Reaching the Debt Ceiling
With the U.S. government reaching its legal borrowing limit on Monday, here are some answers to commonly asked questions:</br></br>Q: What is the immediate impact of reaching the debt ceiling?</br></br>A: For now, government services will largely continue uninterrupted. However the Treasury Department has started undertaking some technical, emergency steps to conserve cash so it can pay its bills and make payroll. It has stopped issuing certain debt for state and local governments. Among other things, it can stop payments into the Civil Service Retirement system, redeem existing investment, and stop reinvestment in the exchange stabilization fund, which buys and sells foreign currencies.</br></br>Q: Is this a default?</br></br>A: No. A default would occur after the emergency measures are exhausted and it runs out of cash to pay its bills. Treasury officials say that would occur Aug. 2, if Congress does not raise the debt ceiling before then. They say that could mean stopping or limiting not only interest payments to debt holders, but also Social Security and Medicare payments, unemployment benefits, tax refunds and money owed to government contractors.