One of the basics of finance is that U.S. government securities represent a “risk-free” rate of return, but unless Congress and the White House can hammer out a deal to raise the debt ceiling, we may be heading for a historic default by June 1, according to Treasury Secretary Janet Yellen(opens in new tab). If that happens, what impact can you expect on your own finances?
First, what is the debt ceiling? Federal law caps how much national debt the U.S. Treasury can issue in the form of securities such as Treasury bills, bonds and notes to pay its bills. Once that debt limit, or debt ceiling, is reached, the U.S. government cannot borrow more until Congress raises the cap. That means that, under current rules, there soon won’t be enough cash to make upcoming interest payments on the existing debt.
