October 8th, 2013
06:52 AM ET

How the Debt Ceiling Would Affect You

Next up: the debt ceiling.

The White House continues to issue dire warnings about the economic consequences should Congress fail to raise the debt ceiling this month. President Barack Obama told Wall Street to be "concerned" and Treasury Secretary Jack Lew said Congress is "playing with fire."

But despite all the drastic pronouncements, some Republicans in Congress aren't buying it. For one thing, they doubt that October 17 is the date when the Treasury will be unable to meet its obligations.

Rep. Lee Terry, R-Nebraska, is one of those lawmakers.

"For him to just put out the 17th as a drop-dead date, I don't think there's a lot of credibility to that. I don't think a lot of my peers and I believe in that," Terry recently told CNN.

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The deadline for a potential government default is fast approaching nonetheless, and could have disastrous effects. CNN Business Correspondent Christine Romans explains, the Treasury Department is about to run out of money to pay all of its bills and can’t currently borrow more.

Unless Congress raises the debt ceiling, “it would have to rely on $30 billion in cash that's in the Treasury's coffer right now," Romans reports. "There's also daily revenue coming in but that fluctuates, so we can’t really count on how much is exactly coming in and that’s not enough to pay everything.”

And come November 1st, Social Security, veterans benefits, military pay and Medicare bills will all be due. Once those priorities are met, the government will no longer have funds for remaining interest payments, which absolutely must be paid.

The risks if they aren't paid: Stock markets would most likely plunge. The value of the dollar would crash.  Interest rates would rise for the country. Our borrowing costs would increase.

"That means, credit card rates, mortgage rates, car loan rates," Romans says. "And ironically, our debt and deficit would explode because of those borrowing costs.”

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