Borrowing would be very costly in a post-default environment. Access to traditional sources of credit could be cut off. This will leave the government no choice but to boost taxes and cut spending to a far greater degree than Washington lawmakers are currently talking about.
Even if a deal is made to increase the debt limit, America’s foreign creditors are cautioning against simply returning to business as usual. They are demanding a credible plan to close the deficit gap and to assure global markets that the US is serious about reducing its dependency on deficit financing.
Continuing to add trillions to the national debt places the US in danger of losing control of its own destiny – a fact that would become clear in short order in the unlikely event that America’s creditors, such as China and Japan, decided to call in their loans or refused to extend additional credit.
