The Government will completely run out of money and ability to use extra ordinary measures to pay current obligations sometime in the fall. The worry is how ugly the fight will get.
There is no evidence, and there are no signs that the act of raising the debt ceiling will be congenial. All indications are that the amount of the debt ceiling increase will be minimal as well. Rather than increasing the amount of the debt ceiling by a larger amount that will last 2 or 3 years, congress has already indicated that they expect the amount of the debt ceiling increase to be only around $500 billion, an amount that will have to be revisited by 2014.
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It appears that both parties are more concerned about their own agendas and appearing to hold out for the best deal possible, rather than the fiscal health of the domestic economy and the long term credit of the country. In 5 to 10 years, a high percentage of sitting politicians will not be in office. However, any damage they do now in terms of the credit rating of the country will be either permanent or last for decades.
Any further downgrade in the country’s credit rating will be solely attributed to how much the two parties fight. Credit rating agencies have already stated that the U.S. credit rating downgrade in 2011 and any upcoming are mostly due to the inability of the government to come together and solve the problem.
The credit rating agencies have already stated that they may downgrade again if there is further intense fighting between the parties and go to the brink before a deal is closed.