Why should the United States?
Just like a person who has different sources of financing, from a mortgage to credit cards, countries are maintained through different sources of income.
“The United States government does not have sufficient resources to meet all its expenses, both the programmed and the emerging ones,” explained Janeth Quiroz, deputy director of economic analysis at Monex.
When spending exceeds revenue, the government borrows money through T-bills, bills, notes, floating-rate notes, and inflation-protected Treasury securities. The national debt is the accumulated amount of said loan plus the interest associated with it that must be paid to those who bought said securities (investors), explains the United States government on the Treasury Department’s FiscalData site.
According to the US government, if an agreement on the debt ceiling is not reached, on June 1 they will no longer have the resources to meet their commitments.
“If (the government) is not financed, it runs out of resources; if it runs out of resources, it becomes inoperative because it no longer has enough money to pay,” Quiroz warned.
And if the debt ceiling does not increase?
The main affected, warned Quiroz, would be all those who bought securities from the United States government.
“It would be something unprecedented, something very bad” for the US economy, said Gabriela Siller, director of economic analysis at Banco Base.
If the United States falls into default, it would translate into a reduction in aggregate demand, as a result of lower public spending, as well as volatility and risk aversion, agreed the analysts consulted by Expansión.
This, added Gabriela Siller, would cause the United States to “quickly enter a recession” and the “domino effect” that it would have on the other variables.
“In 2011, simply because they were slow to raise the debt ceiling, it created volatility, S&P cut the credit rating; volatility generates uncertainty and lower economic growth”, added the Monex economist.
For Mexico, Siller and Quiroz pointed out, it would represent lower exports, a smaller amount of remittances and foreign direct investment (FDI).
The sectors most affected by a decrease in consumption in the United States would be those related to secondary activities, mainly manufacturing.
Everything indicates that Republicans and Democrats will reach an agreement on the debt ceiling, the economists pointed out. However, they specified that they will wait until the last moment to reach an agreement, as part of a political strategy, with a view to next year’s election in the United States.
Although it is unlikely that a deal will not be reached, some investors have already taken “precautionary positions,” said Janeth Quiroz.
In the past, it has happened that they reach an agreement to increase the debt ceiling or to suspend it for a certain period of time, he added.