Debt Ceiling Standoff: What Happens If Washington Falls Behind On Its Bills?

The U.S. government could fall behind on its bills next month - and even default on its debt - if Congress doesn't raise a $31.4 trillion cap on government borrowing, a failure that could trigger economic calamity and panic on global financial markets.
What follows is a timeline showing how a cascade of missed payments could unfold, based on the U.S. Treasury's warning that it could run out of cash as early as June 1, and daily tax receipts and spending obligations projected by the Bipartisan Policy Center, a Washington-based think tank.
On June 1, US Treasury’s cash would be depleted and the US $21Bn in tax revenues would not adequately cover the promised US $101Bn in spending obligations promised by Congress. With debt principal payments coming due - including more than $100 billion on June 1 - the Treasury would borrow just enough to cover what's due and stay under the debt limit. If investors declined to lend that money out of fear they wouldn't get paid back, America could start missing payments and enter default on its debt, rocking the global financial system.
On June 2, even if Washington kept paying debts on time, stock markets would likely be swooning. That could put pressure on Republican House Speaker Kevin McCarthy and Democratic President Joe Biden to act quickly. Republicans, who control one chamber in Congress, are demanding steep spending cuts in exchange for their support for raising the debt ceiling.
Without a deal, Pensioners and other Social Security beneficiaries wouldn't get the $25 billion owed them. States wouldn't receive the $2 billion they are owed for Medicaid health insurance subsidies for the poor.
On June 9, more than a week into the crisis, it's possible some checks could finally go out. The U.S. Treasury would have collected about $105 billion in taxes since it stopped being able to add to the debt, enough to cover the bills from June 1. However, more bills would keep coming due, and schools expecting $1 billion in federal funding would have to do without.
Things would get extra dicey on June 15 when the Treasury is due to pay investors about $2 billion in interest payments on the national debt. The Treasury said in 2014 - following another near-collision with the debt ceiling - that it is technically capable of prioritizing interest payments over other obligations. Provided that capability panned out, the day's inflow of business tax receipts would give the Treasury enough cash to make the debt payment. However, revenues wouldn't cover all the other bills due June 15, such as military salaries.

(Source: Reuters)