Debt Ceiling: What Happens on August 2?

Last Updated Jul 25, 2011 9:58 AM EDT

The President is peeved--OK, maybe downright mad. Evidently, President Obama told congressional leaders, who are wrangling over a debt ceiling compromise, that "enough's enough."

I talked about the deficit (which is like your family's annual cash flow), the national debt (like your family's credit card balance) and the debt ceiling (the country's credit card limit) with CBS television stations this morning:

If we get to August 2nd without a deal, here's what's likely to occur:
  • US government bondholders will be paid
  • Social Security checks could be delayed
  • Non-essential government services will be shut-down
  • Non-essential government workers will be furloughed
  • US economy would grind to a halt, increasing the odds for a double-dip recession
And for those of you wondering wondering why the stock market is blissfully rising amid these potentially momentous events, here's the reason: Wall Street traders fully expect politicians to reach a deal. If there's no deal, look out below!
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    Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.



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