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Federal Debt, Part 2: What Happens IF? (Vol. 34)

Updated: Feb 7, 2023

analyticsbox | Jan 12, 2022

National Debt Chart

What Happens if the Federal Government Runs out of Money?

Can’t happen - right? Wrong. Bad economic policy and fiscal mismanagement has caused default on sovereign debt before, just never on a scale like the U. S. Greece defaulted (although they didn't call it that), and they had the EU (Germany) to bail them out, at least for the time being. They needed a few hundred Billion, not many Trillions. Almost every country in the world is borrowing to pay its bills, and this cannot go on forever.

A failure of the largest economy in the world is unprecedented - uncharted territory. So trying to figure out what the impact is - well, it is a bit speculative.

What would cause a failure? If no one would lend the US money any more because of lack of confidence that we would be able to pay them back (see Facts No Spin #4, The Great Ponzi Scheme and Facts No Spin #33, Federal Debt: 5 Alarm Fire). For a short time, we could print money, but that never ends well. Venezuela, anyone?

We already know that Social Security exhausts its trust fund in 2033 (or sooner, the projections keep getting worse each year). This will trigger an automatic reduction in payments, currently projected at 22%, so the income would match the benefits paid. To keep the promises made, the general revenues of the government would have to be used, increasing the deficits even more.

Medicare also exhausts its trust fund in 2026. There is no automatic trigger there, so presumably payments to providers would be slashed or general revenues would have to be used, again increasing the deficits more.

But what if we just couldn't pay our bills? We would be forced to balance our budget with draconian cuts to expenses, this would certainly evolve into a world wide economic catastrophe that is unimaginable. Or worse, our debts became valueless and Trillions of dollars of debt had to be written off balance sheets around the world. There is no way of knowing what would happen in such a dire scenario. It would be ugly.



There is an old saying: “The American people will always do the right thing, once all other options are exhausted.” We have to be better than that - demand fiscal sanity from your representatives now, and if they don’t get it, then vote for someone who does.

If you agree, then follow these steps to send a letter to your representatives to let them know we need change!

Step 1: Use this link to quickly and easily find your representative and how to contact them:

Step 2: Click here to view a sample letter to send.

Step 3: Send!


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