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Dysfunction And Default: Why The Debt Ceiling Is So Scary

Christopher Coppock |
October 8, 2013 | 10:37 p.m. PDT

Executive Producer

The inability of Congress to reach any sort of agreement threatens to thrust our country through the debt ceiling (Joe Wolf/flickr)
The inability of Congress to reach any sort of agreement threatens to thrust our country through the debt ceiling (Joe Wolf/flickr)
We've been hearing for the better part of a month now about the government shutdown and how terrible it all is. 

We've learned how Ted Cruz talking for almost a full day in the senate, about the complete stalemate in congress, bickering between Obama and Boehner, and a shooting scare in the Capital, among many other less than auspicious developments. 

We've heard about closed National Parks, we've seen the National Oceanic and Atmospheric Website go down during hurricane season and we all hear everyday about how our elected representatives are no closer to solving this crisis. 

There is one looming crisis, however, a crisis that is potentially far more damaging that the government shutdown, that has received much less coverage. This is, of course, the debt ceiling and the potential of the U.S. defaulting on its debts. 

The major concern here is that congress will not raise the debt ceiling, the limit that congress has told the Treasury beyond which it cannot borrow money. If congress does not raise the debt ceiling, on October 17th, only eight days away, the United States will no longer have enough money to cover the decidedly large gap between our nation's spending and our tax revenue and our country will effectively default on our loans. 

There are a couple reasons this potential default is much worse than the government shutdown. 

The first reason is our fear of the unknown. The government shutting down has happened before, and in its current iteration it can be frustrating, but is certainly not impacting the vast majority of the country very heavily. If the United States defaults on its loans no one knows what will happen because it has never happened before. 

There is a general consensus that a default would lead to another financial crisis just as we've spent several hard years trying to pull ourselves out of the last one. The fact remains, however, that no one really knows what will happen when U.S. treasury bonds, ones that are supposed to be the surest asset in the world, default on the 17th. 

The second reason a default is scarier than the government shutdown is that a government shutdown is really only a partial shutdown. Emergency services still run, the borders are still patrolled, and air traffic control instillations remain open, among many other 'essential employees.' 

A default, however, is a total default, as we will be unable to pay anyone. The President cannot simply order the Treasury to issue more bonds beyond the limit congress has set and the Treasury does not have the logistical capability to pay some checks but not others. 

If we default, we will be doing it wholesale. 

So while much of the media continues to focus on the arguments going on in Washington D.C. it might be prudent to keep one eye trained on October 17th. 

Perhaps there is little focus on the ever-nearing debt ceiling because no one believes congress will actually let the United States default. Perhaps it is because media outlets think eight days lead time is too much for an issue that might single handedly toss the world back into a recession. Whatever the odds of default are, however, the simple fact that such a major event is only eight days away is a pretty massive indication of how dysfunctional our representatives have become. 

It seems hard to believe that the fight over the Affordable Care Act has created a standoff that has carried us right to the very brink of knowingly allowing another financial meltdown to happen. This, however, is exactly what is happening. 

Read more from Slate.

Contact Executive Producer Christopher Coppock by email.



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