Failure to reach a deal to raise the U.S. debt limit may force President Barack Obama to choose between paying Chinese bondholders or American soldiers, and between Iowa farmers or elderly Social Security recipients.

 Those are among the dilemmas Obama may confront should talks with Republicans founder and the government falls short of funds needed to pay its bills. Other choices would include whether to sell at cut-rate prices financial assets such as gold in Fort Knox or loan portfolios acquired through the bank bailout, to avoid default and keep government services going.

Even if full payments are made to bondholders, interest rates on U.S. debt may still rise, setting off ripples through the financial world that would drive up costs for other borrowers and impede economic growth, said bond traders.

Continue Reading for Free

Register and gain access to:

  • Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
  • Informative weekly newsletter featuring news, analysis, real-world cas studies, and other critical content
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.