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Q&A: Why breaking federal debt limit sparks fear

WASHINGTON — Here's the scariest thing about the looming deadline to raise the U.S. government's borrowing limit: No one knows precisely what will happen if the limit is breached.

It's never happened before.

The possible consequences are dizzyingly complex. But they're all bad. Most ominously, the government might fail to make interest payments on its debt. Any missed payment would trigger a default.

Financial markets would sink. Banks would slash lending. Social Security checks would be delayed. Eventually, the economy would almost surely slip into another financial crisis and recession.

Even if the government managed to make its interest payments, fears about a default would likely cause investors to dump Treasurys and send U.S. borrowing rates soaring.


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