patrick.net

Risks to Boehner in Debt-Ceiling Brinkmanship
http://fivethirtyeight.blogs.nytimes.com/2011/04/11/risks-to-boehner-in-debt-ceiling-brinksmanship/

If the Congress does not vote to increase the debt ceiling — a statutory provision that governs how many of its debts the Treasury is allowed to pay back (but not how many obligations the United States is allowed to incur in the first place) — then the Treasury will first undertake a series of what it terms “extraordinary actions” to buy time. The “extraordinary actions” are not actually all that extraordinary — at least some of them were undertaken prior to six of the seven debt ceiling votes between 1996 and 2007.

But once the Treasury exhausts this authority, the United States would default on its debt for the first time in its history, which could have consequences like the ones that Mr. Boehner has imagined: a severe global financial crisis (possibly larger in magnitude than the one the world began experiencing in 2007 and 2008), and a significant long-term increase in the United States’ borrowing costs, which could cost it its leadership position in the global economy. Another severe recession would probably be about the best-case scenario if that were to occur.