--- title: What if the U.S. Defaults? TIME Explains | TIME description: TIME economics writer Rana Foroohar explains the economic impact of a U.S. default if a deal isn't reached in Congress. canonical: https://time.com/video/sJld8p7d/ og:title: What if the U.S. Defaults? TIME Explains og:description: TIME economics writer Rana Foroohar explains the economic impact of a U.S. default if a deal isn't reached in Congress. og:url: https://time.com/video/sJld8p7d/ og:image: https://cdn.jwplayer.com/v2/media/sJld8p7d/poster.jpg?width=720 og:type: video.other twitter:card: summary_large_image twitter:title: What if the U.S. Defaults? TIME Explains twitter:description: TIME economics writer Rana Foroohar explains the economic impact of a U.S. default if a deal isn't reached in Congress. twitter:image: https://cdn.jwplayer.com/v2/media/sJld8p7d/poster.jpg?width=720 --- # What if the U.S. Defaults? TIME Explains > Sponsored content. Supplied in partnership with TIME. 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They are at time.com/newsletters and are separate from a paid subscription. ## Video: What if the U.S. Defaults? TIME Explains [Watch (HLS stream): What if the U.S. Defaults? TIME Explains](https://cdn.jwplayer.com/manifests/sJld8p7d.m3u8) (1:45)  _Published 2013-10-16. TIME economics writer Rana Foroohar explains the economic impact of a U.S. default if a deal isn't reached in Congress._ --- Jul 27, 2023 3:51 PM UTC --- ## More From This Series [All Videos](https://time.com/video/) [Canada and the U.S. Have Reached a Deal on NAFTA, Official Says](/video/3PpoIhPz/) ### Canada and the U.S. Have Reached a Deal on NAFTA, Official Says [Argentina Defaults On Debt For The Second Time In 13 Years](/video/Ylli4Nfb/) ### Argentina Defaults On Debt For The Second Time In 13 Years [Rana Foroohar: Surprising Deficit Numbers Highlight Growth](/video/eIrzbWgd/) ### Rana Foroohar: Surprising Deficit Numbers Highlight Growth --- ## Transcript The U. S. government is just hours away from breaching the debt ceiling. Here's what you need to know. Midnight, Wednesday, the 17th, the U. S. government will go over the debt ceiling. That means the government will not be able to borrow any more money to fund normal operations, unless Congress makes a deal. It could have a major impact in the market. Credit ratings agencies like Fitch are already talking about downgrading the US credit. The last time this happened in August of 2011, we saw markets fall by 13 % when that happened. If the US were actually to go into what's called the technical default. And not be able to make the interest payments on the credits to China and Japan and other foreign holders of our debt. That would really be a catastrophic market event. That's why economist believe that the government will find a way to separate out those payments and continue making them. But what is that mean for the rest of government. While there is a gap between our spending and our tax revenue that's about 4 % of our 16 trillion dollar GDP. The big worry in the markets right now is that the government is going to have to close that gap very quickly in order to stay under the debt ceiling. [ MUSIC ] If that happens, it would be a huge fiscal contraction. And it would certainly push the US into another recession, possibly triggering a global slowdown. The good news is that US treasury bills are still a global safe haven. They are what people want to own. And I think that if we get a deal quickly, you're probably going to see markets stabilize. The big question going forward is how long we can keep playing chicken with our debt and not have a more serious impact. ```json {"@context":"https://schema.org","@type":"VideoObject","name":"What if the U.S. Defaults? 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