With an Aug 2 deadline, what happens on Aug 3?
Many observers didn’t think we’d actually get to this point. With the August 2 deadline set by the Treasury Department just days away, and with no final agreement in sight, what will happen on August 3 if the debt ceiling is not raised and the U.S. can no longer meet all of its outstanding financial obligations? Last month, the Bipartisan Policy Center analyzed this very question. For the remainder of August, federal spending would have to be cut by nearly 44 percent. Treasury gets to decide what bills gets paid and what don’t get paid. Here is an example of what gets paid and what doesn’t:
[I]nterest on our existing debt, Medicare, Medicaid, Social Security, unemployment insurance and defense contracts [get paid]. Without cutting from these items, there would be no money to fund entire U.S. departments, such as Justice, Labor, and Commerce. There would also not be funds to pay for veterans’ benefits, IRS refunds, military active duty pay, federal salaries and benefits, special education programs, Pell Grants for college students or food and rent payments for the poor.