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What happens on Aug. 2 if the debt ceiling is not raised: Jay Carney's answer

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WASHINGTON---White House Press Secretary Jay Carney at the Wednesday briefing outlined some of the ramifications of what happens on Aug. 2 if the debt ceiling is not raised. There are, said Carney, "no off-ramps."

WASHINGTON---White House Press Secretary Jay Carney at the Wednesday briefing outlined some of the ramifications of what happens on Aug. 2 if the debt ceiling is not raised. There are, said Carney, "no off-ramps."


Q: A number of Wall Street firms are saying that Treasury actually has enough cash on hand to continue through August 10th or 15th even if the borrowing authority runs out on the 2nd. Can you respond to that and tell us what -- what would happen August 2nd if the debt limit remains the same?


MR. CARNEY: Here's -- here's what important to know. We began this process with a letter from the secretary of the Treasury to Congress in January identifying with, it turns out, great precision when we would hit the debt limit. We did, May 16th. Since then, the Treasury secretary has been able to take extraordinary measures, as some of his predecessors have, in order to extend the period before we run out of borrowing authority. That deadline is hard and fast.

Now -- and there's no -- there is no escaping that. There's no -- there are no off-ramps. People keep looking for off-ramps. They don't exist. OK? What I have said, what everyone has said, is that once we lose our borrowing authority we become at risk of default on our obligations.

Now, does the United States continue to take in money? Of course it does. But the point is that for -- beyond -- after we cease to have the capacity to borrow money, every 60 cents we take in is 40 cents short of the dollar we need to pay out.

And you create a situation -- movie analogies are popular these days -- you create a situation where you have real people who suffer, in addition to the impact on your interest rates, whether you have a car loan, mortgage, a student loan, a credit card. Interest rates go up; it's a tax on everybody. OK?

In addition to that, among the many obligations we have -- the 80 million checks that the Treasury Department alone issues, payments that it issues every month -- of the 1.2 billion payments the federal government makes in a year, those include veterans' payments, Social Security payments, disability payments.

They include the bills to contractors, small businesses, big businesses that do work with the government; the people who manufacture the ammunition that we send to our troops in Afghanistan.

And choices then have to be made. And it's a "Sophie's choice," right? So what do you say? Who do you pay? That's an impossible situation that this country has never faced, and should never face if Congress does what it was elected to do and does its job.

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Lynn Sweet

Lynn Sweet is a columnist and the Washington Bureau Chief for the Chicago Sun-Times.

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This page contains a single entry by Lynn Sweet published on July 27, 2011 3:51 PM.

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