Debt Ceiling vs. Government Shutdown: Which is more likely?

EXPERT COMMENTARY

Debt Ceiling vs. Government Shutdown: Which is more likely?

By Bruce Yandle |
Feb 22, 2011

Despite that both parties in Congress seemingly unwilling to compromise on a budget, a complete shutdown of government is much less likely than failure to increase the debt ceiling. 

Shutting down the government is a far more serious matter.  By law, when the government shuts down, agencies must begin immediately to close shop, store records, and send sensitive materials to secure warehouses.  Shut downs are costly.

A complete shutdown would temporarily end such things as protection of the president and Congress, close the FBI, and cease protection of the food supply, agriculture commodity inspecting for export, and airport security, and that citizens tend to punish members of Congress who engage in shutting down government.

On the other hand, if Congress fails to raise the ceiling, there are several ways that Treasury and the Fed can deal with the resulting problem.

Just paying bills with newly printed money would be the simplest way around the problem.  Of course, continuous use of printing press money is tantamount to default.  The action must be seen as temporary.

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