There appears to be some confusion about the relationship between not raising the debt ceiling on October 17th and the timing of a credit default, news outlets seeming to jump to the conclusion that one naturally follows the other and, in at least one case, immediately.
Not surprisingly, CNN jumps the gun a bit when opening with:
As the partial shutdown of the federal government enters its seventh day Monday, the countdown to a government debt default drops to ten days.
A debt default, if the debt ceiling isn’t raised by October 17th (i.e., ten days from now) was apparently based on these comments from the Treasury Secretary:
Treasury Secretary Jack Lew said on CNN’s “State of the Union” that the government risks more than its credit rating if the debt ceiling is not increased by Oct. 17. He dismissed suggestions that the government could avoid default by making only interest payments.
The Bloomberg report isn’t much better as the certainty expressed in the report’s title belies the carefully chosen words by the Treasury Secretary:
Treasury Secretary Jacob J. Lew said Congress needs to pass a debt-ceiling increase by Oct. 17 or the U.S. will be “dangerously low” on cash and risk defaulting on its payments.
“On the 17th, we run out of our ability to borrow, and Congress is playing with fire,” Lew said on CNN’s “State of the Union” today. “If they don’t extend the debt limit, we have a very, very short window of time before those scenarios start to be played out.”
“If the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default,” Lew said. “There is no option that prevents us from being in default if we don’t have enough cash to pay our bills.”
We are sure to hear more about this in the days ahead but, one thing seems certain, if not raising the debt ceiling by October 17th automatically leads to a default, someone should tell the Republicans because many of them don’t believe it.
Moreover, after reading all of the above a couple times, it’s easy to understand why.