Debt Ceiling: What if America Defaulted?

Wednesday, April 13, 2011

It’s only been a few days since lawmakers in Washington agreed on a budget for the next fiscal year, but Democrats and Republicans are already gearing up for the next big budgetary showdown: raising the nation's debt ceiling. In the coming months, Congress will have vote on whether to raise the debt ceiling, something Tea Party Republicans say they won't support in hopes of forcing President Obama and Congress to cut spending. But for every dollar the government spends, it has to borrow forty cents. In February, Fed Chair Ben Bernanke said that the economic results of not raising the debt ceiling and defaulting would be "catastrophic" 

Austan Goolsbee, chairman of the president’s Council of Economic Advisors, told ABC News a default by the government is "totally unprecedented in American history." But Kenneth Rogoff, professor of economics at Harvard, former chief economist at the IMF, and co-author of "This Time is Different: Eight Centuries of Financial Folly," says the U.S. has actually defaulted twice before. He joins the program for a little financial history lesson, and to talk about what a default by the modern U.S. government would mean for the rest of the world.


Kenneth Rogoff

Produced by:

Max Bernstein

Comments [2]

Austin from Boston

Government budgets should be treated like family budgets. Both are subject to the same fluctuations, good and bad.
What happens when families decide to take out a new credit card each year and raise the credit limits on the ones they have, all without paying them down much? Eventually, monthly payments will exceed monthly income, and the cycle will have to be repeated again.
Thrift, conservation of resources, intelligent consensus on budget changes without cutting needed services, these are the principles that drive my family budget.

Apr. 13 2011 09:32 AM
Ed from Larchmont

And, with the baby-boomers retiring and the lack of young people, more people on Medicare and Social Security, the budget problems are just going to get worse.

Apr. 13 2011 08:16 AM

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