Commerce Street Holdings President and CEO Dory Wiley joined ‘Varney & Co.’ to discuss the debt ceiling plan and its anticipated impact on the stock market.
Treasury Secretary Janet Yellen on Wednesday reiterated the U.S. government could run out of cash to pay its bills by early June, putting the country on a collision course for a potentially catastrophic default on its financial obligation.
The debt ceiling, which is currently around $31.4 trillion, is the legal limit on the total amount of debt that the federal government can borrow on behalf of the public, including Social Security and Medicare benefits, military salaries and tax refunds.
If the U.S. failed to raise or suspend the debt limit, it would eventually have to temporarily default on some of its obligations, which could have serious negative economic implications. Interest rates would likely spike, and demand for Treasurys would drop; even the threat of default can cause borrowing costs to increase, according to the Committee for a Responsible Federal Budget.
While the U.S. has never defaulted on its debt before, it came close in 2011, when House Republicans refused to pass a debt-ceiling increase, prompting rating agency Standard and Poor's to downgrade the U.S. debt rating one notch.
This is a developing story. Please check back for updates.