Economics and markets
November 09, 2023
Different from the debt ceiling debate
It’s important to understand that the current negotiations to keep the government fully operational are different from the debate earlier this year over whether to raise the debt ceiling. In that debate, the biggest risk was a potential U.S. default if lawmakers did not raise the debt ceiling. A default occurs when the U.S. Treasury has insufficient resources to satisfy the government’s obligations. A default has never happened; if one did, it would have significant ramifications for U.S. creditworthiness and would cause spillover effects on the global financial system.
A shutdown occurs when the federal government suspends services deemed nonessential because a new law to fund discretionary spending programs was not approved ahead of a fiscal year deadline. When Congress cannot agree on a new funding bill, it may pass a continuing resolution that extends previous funding levels to keep the government fully operating.