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Dual crises: Shutdown, debt limit could merge

12 October 2013 22:15 (UTC +04:00)

Baku-APA. Democrats and Republicans regularly warn about the dire consequences of legislation they don't like. Often it's gloom-and-doom partisan hype, APA reports quoting Associated Press.

This time, though, people already are feeling the fallout as twin tempests — the partial government shutdown and a potential default on the country's debts — threaten to form a single economic-policy superstorm.

The shutdown began Oct. 1 because a divided Congress couldn't agree on a budget. Thousands of federal workers are furloughed, national parks are closed and many nonessential governmental services are dialed back or put on hold.

The shutdown doesn't directly threaten Social Security, other mandatory benefits or U.S. interest payments on the national debt.

Breaching the debt limit would.

Unless Congress raises that limit soon, the government will run out of the authority to borrow and pay its bills on Thursday, the Treasury Department says.

A default would challenge the U.S. dollar's status as the world's "reserve" currency. More than 60 percent of all foreign country reserves are in U.S. dollars, the prime currency in international trade.

"Without enough money to pay its bills, any of its payments are at risk — including all government spending, mandatory payments, interest on our debts, and payments to U.S. bondholders," the bipartisan Committee for a Responsible Federal Budget said in a recent report.