Debt ceiling deadline is biggest threat to U.S. economy

(CBS News) NEW YORK - Next week's deadline on paying America's debts is the biggest threat to the economy and has turned Wall Street increasingly sour. The Dow hit a high in mid-September, but since then, it has fallen 900 points. It dropped nearly 160 Tuesday after hearing House Speaker John Boehner and President Obama, closing at 14,776.

Mark Patterson
Mark Patterson
CBS News

The U.S. Treasury is already using emergency measures to pay its bills, but by Oct. 17, it will be down to $30 billion in cash.

"Thirty billion in the Treasury is equivalent probably to $30 in your checkbook or mine," says Mark Patterson, a former Treasury chief of staff under President Obama.

Patterson says before the end of this month, the U.S. government will owe $12 billion in Social Security payments and $6 billion in interest payments on the debt.

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And on the first of next month, another $58 million is due in Social Security, Medicare and military and veterans' benefits. The president would have to decide who to pay and who to delay.

"When I was at Treasury, we looked at all the options for sort of contingency plans," Patterson says. "They all have sort of God-awful consequences."

Watch: Obama says no more "rabbits in our hat" to pay U.S. debts, below.

If, for example, the government cannot pay interest on its Treasury bills, which are considered the world's safest investment, it could cause chaos in financial markets.

As Goldman Sachs CEO Lloyd Blankfein said at the White House last week, "We're the most important currency in the world, we're the reserve currency of the world, payments have to go out to people. If money doesn't flow in, then money doesn't flow out. So we really haven't seen this before, and I'm not anxious to be part of the process that witnesses it."

Watch: Boehner responds to President Obama, below.

A debt ceiling crisis, by one estimate, could cause interest rates to double on new mortgages, credit cards, student loans and auto loans, according to GoBankingRates.com.

"This is a country that pays all of its bills on time, always has -- not a day late or a dollar short," Patterson says. "That's the U.S. Treasury, and if we operate in a different way, we are just asking to become a country that has frequent debt crises, like Greece."

The treasury borrows nearly one out of every five dollars it spends. One Wall Street analyst said calculating the effects of a U.S. debt default "is like preparing for a large asteroid impact."

  • Anthony Mason

    CBS News senior business and economics correspondent; Co-host, "CBS This Morning: Saturday"

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