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Tom: What happens if the debt ceiling is not raised?

Mellody: There are a number of items here, Tom. If the government is not authorized to borrow to meet its obligations, typically it will start paring back services and prioritizing in order to operate on reserves and the incoming revenues alone. Beyond that, it enters a shutdown phase, suspending all nonessential services and furloughing workers.

Almost everyone agrees that in the worst-case scenario, the government would also delay payments of interest, which would constitute default. Such a move would be disastrous for the U.S economy, and the global financial system. In 2011, Standard & Poor’s stripped the U.S. of its triple-A credit rating for the first time simply because the Treasury came close to being unable to pay certain benefits.

Tom: So not raising it is certainly bad for the economy. What will that mean for Americans?

Mellody: As we saw in 2013, shuttering the government has huge consequences for the American people. To start with, 2 million federal workers will see their paychecks delayed during a government shutdown, and some “nonessential employees” could not get paid at all. This is especially impactful for Black americans, as we hold about 18 percent of federal civilian jobs, while making up around only 13 percent of the u.s. population.

Some 3.6 million veterans could miss disability of pension payments, if a shutdown were to last for a long period. Nutritional programs for women and children could be impacted, along with Head Start programs. And funds for small businesses and national parks could stop flowing. And these are just a few examples of very important programs that the government operates that are affected when the government is not funded to operate. Hopefully we do not see this happen again this year.

Tom: Always good to have you explain things to us! Thanks for joining us Mellody!

Mellody: Great to be here, Tom!

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Money Mondays: Should You Care About The Debt Ceiling?  was originally published on

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