So the world won't end if a dysfunctional Washington can't find a way to pass a funding bill before the new budget year begins on Oct. 1.
Social Security checks will still go out. Troops will remain at their posts. Doctors and hospitals will get their Medicare and Medicaid reimbursements. In fact, virtually every essential government agency, like the FBI, the Border Patrol and the Coast Guard, will remain open. Furloughed federal workers probably would get paid, eventually. Transportation Security Administration officers would continue to man airport checkpoints. But lurking around the corner is far bigger danger: Sometime in late October or early November the government could run out of cash. The U.S. would be unable to pay all of its bills in full and on time for the first time in history if it couldn't borrow more money. While the Treasury Department probably would make interest payments to bondholders to prevent a catastrophic default on the debt, it wouldn't be able to make other payments on time, which would mean delays in Social Security benefits and in paychecks for federal workers and troops in the field.
Americans would feel the pain.
To prevent a "shutdown," Congress must pass a temporary spending bill before Oct. 1. To prevent a default, it must raise the $16.7 trillion cap on government borrowing.
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"A default would occur if the government is no longer able to borrow and has run out of cash to pay all the bills coming due. Then, the government has to rely on cash coming in to pay whatever bills it can.Since the government has never defaulted, it's impossible to know for sure how it would behave. But it's commonly assumed that Treasury would make sure that it would meet interest payment so as to not alarm financial markets and prompt U.S. creditors to stop "rolling over" debt by reinvesting bonds when they mature."
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