In the first few months of the 2011, the federal government will run out of cash. We will max out the federal credit card, and Congress will refuse to open another line of credit. Treasury won't have enough money to both run the government and pay back our lenders.
The implications will be dramatic, and possibly cataclysmic. We will stop funding up to 40 percent of all federal government
activities. While the Treasury will feel required to pay back international investors to calm fears of a historic default, we won't have enough money to pay for Social Security, Medicare, homeland security, and the keep the federal government running. Workers will lose jobs. Companies would lose contracts. Businesses will lose confidence. Both inside and outside the United States, panic will proliferate. Global markets will roil and the US economy will tip from slow growth back into negative growth, double dipping into recession.
It sounds like a doomsday scenario. It's closer to reality than you might think. In fact, it's the likely outcome if RNC Chair Michael Steele and numerous GOP representatives from the Tea Party get their way.
After a year of running against deficits, newly minted Republicans in the House will face an ironic major vote in early 2011 to raise the debt limit. In a cruel twist of fate, the anti-debt party's first major vote would help the government go further into debt. The vote sounds suicidal. But the alternative is chaos. [What's the debt ceiling? Read here.]