Does the Debt Ceiling Really Matter?

Drew T. Matus
MAY 25, 2023

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Concerns about the debt ceiling tend to focus on the most unlikely outcome—a true default by the U.S. government. Even in a scenario where the government misses an interest payment, the most likely scenario is a delay in the payment rather than a true loss of principal. The increase in market volatility that is likely to result from a debt “default” would likely be more troublesome than any direct economic impact from reduced cash flows or transfers to beneficiaries or vendors.