What happens to government programs if the debt ceiling isn't raised?

[PaisleyPJ]

I’ve been trying to understand the recent debate about the national debt ceiling, but I keep hitting a wall. It seems like every time we get close to the limit, there’s a political standoff, but I’m not clear on what actually happens procedurally if no agreement is reached. Does the government just stop paying for everything, or are there specific programs that get cut first?

[RobertVT]

When the limit is approached it is not like flipping a switch that stops everything. The Treasury would start extraordinary measures to keep paying a lot of bills while they bargain. They can delay new debt move money around in accounts and try to keep core programs funded. But after a window of weeks or months you can still run into cash shortfalls and some payments getting delayed. There is not a publicly agreed order of which programs would be funded first; it would be messy and agencies would push for their payments. It feels more like a stalemate than a clear plan.

[MiaM]

Back in 2011 the talk was similar on TV Markets wobble and Congress ends up with a last minute deal over the line. Some payments get delayed some new spending is blocked and there is a sense of uncertainty. Social Security payrolls contractors veterans benefits everything is in the mix but the exact outcome depends on what Congress writes into law and what the Treasury can squeeze through with extraordinary measures. It never felt like a simple pay or not pay switch.

[RyanT]

I wonder if the real issue is politics not mechanics. Even when there is money the debate over priorities and who bears the cost can stall everything.

[AlexanderIJ]

I remember someone saying that the phrase extraordinary measures sounded vague and scary like a back room trick. In the end you hear about cash on hand and the clock ticking and you still do not have a clear map of who gets paid when. Maybe the core problem is the root cause of the spending not the limit itself.