The Debt Ceiling Crisis Explained: What Would Happen if the U.S. Defaults on Our National Debt

The deadline for congress to raise the $16.7 trillion debt ceiling is less than 48 hours away, and yet, the federal government remains shutdown while congress remains deadlocked over partisan politics.

The Republican party has threatened not to raise the federal debt limit unless Democrats give in to a broad and varying set of demands made throughout the past year. However, the GOP's strategy to pass their political agenda is extremely reckless and hurts the American people in addition to putting the entire global market in jeopardy.

If Washington doesn't reach a deal to avert a national default, then an economic crisis could start unfolding Thursday that would eventually leave millions of Americans out of work. In the beginning, however, many people would not notice when the government hits a $16.7 trillion cap on its debt since checks would likely go out on time that day for everyone from bondholders to workers who are owed unemployment benefits, according to analysts in government and the private sector, reports Reuters.

But nevertheless, that day will mark the passage of the U.S. into a period of heightened risk where its financial sector could freeze up in a panic, dealing a potentially severe blow to the nation's businesses and citizens. That's because the government will no longer be able to add to the national debt, and will have to rely on incoming revenue and about $30 billion in cash to pay the nation's many obligations. However, unless Congress raises the nation's debt ceiling, the money would be gone within days.

The Congressional Budget Office estimates Washington would start missing payments between Oct. 22 and the end of the month. The U.S. could miss a $12 billion payment due to its Social Security pension program on Oct. 23.

Around this time, the economy would start to sink.

To keep from adding to the national debt, the government may be forced to slash spending by about a third each day by cutting funding to critical programs that millions of Americans depend on like social security, WIC and food assistance. Additionally, soldiers could stop getting paychecks on time while spending would fall across the country leading up to a second Great Recession, reports Mother Jones.

There's also a possibility that the U.S. may default on U.S. treasury bonds either instead or in addition to cutting essential government programs. This would likely devastate the global economy since the global market depends on U.S. bonds being rock solid. As a result, this would raise the additional risk that interest on treasury bonds might not get paid. At that point, there would be greater risk of a financial crisis because the value of U.S. government debt could be called into question. U.S. debt is used as collateral for trillions of dollars in financial deals, and even Wall Street titans are unsure how scarce credit could become if dealers decide it's no longer worth holding.