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Government: Gauging your debt-ceiling anxiety level

July 26, 2011 |  6:22 pm

Traders work the New York Stock Exchange floor while investors wait for clues about the debt-ceiling impasse.
Lawmakers engage in brinkmanship so frequently, it's easy to tune out the warnings about looming deadlines and possible disasters. Maybe that's why the current impasse in Washington over the debt ceiling hasn't led more people to gird for a financial apocalypse: They've heard the alarm bells before, but they've never seen a fire.

Even the financial industry experts and business leaders who are trying to persuade lawmakers to raise the debt limit ASAP admit that they don't know what would happen if Congress doesn't meet the Treasury Department's Aug. 2 deadline. At some point -- maybe Aug. 3, maybe Aug. 10 -- the government won't have enough cash to cover all the payments that are due. But exactly how investors and markets respond if the federal government started stiffing creditors or shutting down programs isn't known because Washington hasn't been in this position before.

A full-blown default on Treasury debt would be apocalyptic. Short of that, credit rating agencies are still likely to downgrade U.S. debt. Analysts at J.P. Morgan estimate that a downgrade would drive up the government's borrowing costs by $100 billion a year; who knows what it would mean to other borrowers whose rates were tied to T-bills. A downgrade would also likely cause stocks to drop, although how much is anybody's guess.

Nor is it clear when credit markets, stock exchanges and global investors will start reacting. Will they wait until the Treasury Department hits the wall, or will they act as soon as it's clear Congress will miss the Aug. 2 deadline?

I've found myself checking the markets several times a day. But what about you? What's your level of debt-ceiling anxiety? Take our poll, leave a comment, or both!

-- Jon Healey

Photo: Traders work on the floor of the New York Stock Exchange in New York on Monday. Credit:  Lucas Jackson / Reuters

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