The government actually reached its borrowing limit back in May. Since then, the Treasury has taken a variety of measures to avoid exceeding it. But the cash generated by those measures will run out sometime between Oct. 22 and Oct. 31, the nonpartisan Congressional Budget Office estimates.
The date isn't exact because it isn't possible to foresee precisely how much revenue the government will receive and when.
Q. Will the economy escape harm if both deadlines are met?
A. Probably. But even brinksmanship can have consequences. The last major fight over the borrowing cap, in the summer of 2011, wasn't resolved until hours before the deadline. Even though the deadline was met, Standard & Poor's issued the first-ever downgrade of long-term U.S. credit. That, in turn, led to a 635-point plunge in the Dow Jones industrial average the next day.
In August that year, consumer confidence plummeted to its lowest level since April 2009, when the economy was in recession. Spending at retail stores weakened.
"The fallout nearly caused the fragile economic recovery to stall," says Mark Zandi, chief economist at Moody's Analytics.
The International Monetary Fund estimated last month that U.S. budget disputes, like the 2011 showdown, can slow annual growth by up to 0.5 percentage point in other parts of the world.
The Government Accountability Office later estimated that just the threat of default escalated the government's borrowing costs that year by $1.3 billion, or about 0.5 percent.
The drawn-out fights can cause Americans to delay major purchases, such as for cars or appliances, says Ethan Harris, global economist at Bank of America Merrill Lynch. And they can erode confidence in the United States as a place to do business. Employers become less willing to expand and hire.
On Friday, the U.S. Chamber of Commerce, the National Association of Manufacturers and several other business groups urged Congress to fund the government and raise the borrowing limit.
"It is not in the best interest of the employers, employees or the American people to risk a government shutdown that will be economically disruptive and create even more uncertainties for the U.S. economy," the groups said.
Q. All this sounds pretty scary. Why aren't financial markets panicking?
A. Stock prices have fallen in six of the past seven days, partly because of the looming deadlines. But the price declines have been modest. Many investors likely feel they have seen this movie before and know how it ends: with another last-minute deal.
"After several rounds of fiscal brinksmanship ... markets may be somewhat desensitized to the headlines," Alec Phillips, an economist at Goldman Sachs, wrote in a note to clients.
And much has changed since August 2011. The economy has proved more resilient. Growth has remained modest but steady despite tax increases and government spending cuts that kicked in this year. Despite widespread fears, the downgrade of long-term U.S. credit in 2011 didn't cause investors to sell U.S. Treasurys and drive up interest rates and borrowing costs. Rates remained historically low.
The global economy is also in better shape now. Europe emerged from recession in the April-June quarter. Many investors may be poised to scoop up bargains if financial markets fall in response to Washington's budgetary standoffs.
Previously, "those investors who've kept their cool have been rewarded," says David Kelly, chief global strategist at JPMorgan Funds.
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