The 2nd August is a significant day for the US Congress as the United States needs to take action to lift its debt-ceiling so that it fulfills its obligations and pays its debts. If they don’t reach an agreement by the 2nd August deadline the consequences of not being able increase its debt are as follows:
* Federal spending would immediately be cut by 44 percent.
* The spending cut would be equivalent to 10% GDP
* The Treasury Department would be forced to roll over $500 billion in debt.
* The U.S. credit rating could very well be downgraded.
* Higher interest rates as the US attempt to sell $500 billion in new debt so that they can pay off their old debt.
* By paying social security the US have nothing left for: defence; FBI; law enforcement; student grants etc.
Below is an interview from PBS Newshour with Jay Powell, who served as undersecretary of treasury under President George Bush.