Jason Lange

WASHINGTON, (Reuters) – The U.S. government may fall behind in its bills and default on its debt this month if Congress fails to raise a $28.9 billion cap on borrowing by the government. This failure could cause economic panic and financial market panic.

Congress was never far from the default cliff in years past. However, it has been very close.

The following timeline shows the possible consequences of a series of unpaid payments and how they could be triggered if Congress fails to act. This scenario was created by Washington think tank, Bipartisan Policy Center.

DEC. 15

As part of the $1 trillion bipartisan infrastructure bill, which was signed by Democratic President Joe Biden on November 15, the Treasury Department has completed transferring $118 million into a federal highway funds. The government is now dangerously close the legal debt limit. Janet Yellen, Treasury Secretary to the United States has warned Congress that her agency may not be able pay all of its bills.

If quarterly corporate tax receipts are not received by Dec. 15, the Treasury could start making missing payments early. The policy center can project a variety of dates when “X” date – which is the day Treasury must begin paying the Treasury – may fall before the due date.

DEC. 21

It hits the debt ceiling as Treasury cash reserves run dry. Even though the Treasury has $13 billion in tax revenue, it is not enough to pay $19 billion of spending obligations that Congress promised.

It’s hard to believe that anyone doesn’t expect to be paid. Everyone is likely to expect a paycheck. An internal Treasury watchdog said that officials prepared a plan to make sure Washington paid all its bills promptly, rather than choosing to pick and choose. Treasury would first wait until enough money is available to cover a day’s worth of bills before making any payments.

On Dec. 21, many checks wouldn’t go out, including $2 billion owed by defense companies and $5 Billion for states that will help with medical bills for Americans of low income.

DEC. 22

Stock markets might crash as a result of missed payments. This could make it difficult for Senator Republican Leader Mitch McConnell to quickly increase the debt limit, as his minority party is able to slow down most legislation.

Philip Wallach of the conservative American Enterprise Institute, said that McConnell “does not wish to be recorded in history as the man who destroyed the world economy.”

The Treasury could cut checks due December 21 without a deal. Then even larger bills begin to come due. December 22nd, 20 billion dollars in payments will not be made to Social Security beneficiaries or pensioners. This is just days before the 25th of December holiday. The Treasury also fails to pay $7 billion of health insurance subsidy payments. The Treasury finishes the day with $32 Billion in unpaid bills.

DEC. 23

As the Treasury does not pay $4 billion in federal salary, the Treasury’s pile of unpaid obligations increases. States do not receive $2 billion owed to Medicaid for subsidies for poor health insurance.

DEC. 27-DEC. 30

After generating $31 billion tax revenues, the Treasury receives some relief on December 27. After receiving $31 billion in tax revenue, the Treasury is able to finally pay Social Security benefits which were due several days before. The Treasury has no money by December 30 to pay the $4 billion due to soldiers on active duty and the $11 billion to military veterans.

DEC. 31

The situation gets really tense on New Year’s Eve, when the Treasury will pay approximately $10 billion to investors in interest on the national debt. After another collision with the debt ceiling in 2013, the Treasury declared that it can technically prioritize interest payments over any other obligations.

It’s crucial because America would be in default if it didn’t pay its interest. This would have a major impact on the financial system.

Shai Akabas (Director of Economic Policy at the Bipartisan Center) stated that “it would be uncharted water.”