Here’s some basics. Every so often, we have a manufactured crisis in this country because Republicans threaten not to raise the debt ceiling unless the Democrats make unreasonable concessions on government spending. The reason these are crises every single time is that the debt ceiling puts a cap on how much money the government can borrow to pay our nation’s bills. And if the Treasury doesn’t pay its bills on time, then that is a credit default. What happens when you get a reputation for not paying your bills or making late payments?

Well, obviously, it hurts your credit rating. That means it is harder to borrow money and it costs more. The way the Treasury borrows money is that it sells bonds. And if those bonds aren’t considered rock solid investments, then people won’t see U.S. bonds as safe investments. As David Gura wrote for NPR back in 2003, this would be “unimaginably” bad.

Treasurys have been seen as some of the safest investments worldwide. They are held by companies and countries the world over and used as collateral in all kinds of financial transactions. If the federal government failed to pay bondholders, it would have unimaginable consequences for the standing of the U.S.

The Council of Foreign Relations tried to imagine the consequences in a 2023 piece. Here are some anticipated results.

The credit rating agencies would downgrade American bonds, leading to increased borrowing costs for businesses, homeowners and consumers. Consumer confidence would take a hit “that could shock the United States’ financial market and tip its economy—and the world’s—into immediate recession.” The average cost of a 30-year mortgage could go up as much as $130,000. Ten percent of national economic activity would halt and three million American jobs would disappear overnight. Higher government borrowing costs could raise the national debt as much as $850 billion and eat up money for discretionary investments including infrastructure. People would sell off U.S. treasury bonds, weakening the dollar and threatening its status as a reserve currency. That could benefit China and also be catastrophic for poor countries holding a lot of U.S. dollars.

Over half of the world’s foreign currency reserves are held in U.S. dollars, so a sudden decrease in the currency’s value could ripple through the market for treasuries as the value of these reserves drops. As heavily indebted lower-income countries struggle to make interest payments on their sovereign debts, diminished value of foreign currency reserves could threaten to tip some emerging economies into debt or political crises.

Responsible people understand that it’s bad for the U.S. government not to pay its bills, or to pay them late. And that’s why the debt ceiling always gets raised in the end.

The U.S. Congress needs to raise the debt ceiling soon. As Eric Levitz at Vox explains, things are already critical.

Federal borrowing exceeded the debt limit at the start of this year, but the Treasury Department can delay a breach for a few months through various extraordinary measures. But if Congress does not raise the debt ceiling by sometime in the late spring or early summer — the exact timing is not yet clear — then the government will default on its obligations.

Levitz has no confidence that the Republicans will manage to avoid a default this time, but that’s a subject for a separate post. The key point here is that defaults are bad and should be avoided at all costs.

But there are other ways to default than Congress failing to authorize payment. What if, for example, the money was there and available to the Treasury to pay bills but Elon Musk intervened to prevent it? Well, according to the New York Times, that almost just happened?

In the days after President Trump took office, as Elon Musk’s team began pressing for access to the Treasury Department’s payments system, officials repeatedly said that their goal was to undertake a general review of the system. They said they would observe, but not stop money from going out the door.

But emails reviewed by The New York Times show that the Treasury’s chief of staff originally pushed for Tom Krause, a software executive affiliated with Mr. Musk’s so-called Department of Government Efficiency, to receive access to the closely held payment system so that the Treasury could freeze U.S. Agency for International Development payments.

In a Jan. 24 email to a small group of Treasury officials, the chief of staff, Dan Katz, wrote that Mr. Krause and his team needed access to the system so they could pause U.S.A.I.D. payments and comply with Mr. Trump’s Jan. 20 executive order to halt foreign aid.

“To the extent permitted by law, we would like to implement the pause as soon as possible in order to ensure that we are doing our role to comply with the EO,” Mr. Katz wrote.

The U.S. Agency for International Development (USAID) is a branch of the U.S. Government and it must pay its bills on time. A failure to do so will impact the creditworthiness of the United States. It isn’t as immediately catastrophic as failing to pay bondholders on time, but it’s bad. It’s bad on its own, as a series of bad credit events, but it’s also bad because intervening in the Treasury’s payment system to stiff USAID vendors sets a precedent that it can be done to anyone.

For this reason, it’s a reckless act to freeze payments as the fascist regime’s leader has demanded, but it’s doubly reckless to do it through the Treasury payment system. If it must be done at all, it should be done before payments are entered into the system.

Of course, Treasury chief of staff Dan Katz didn’t understand this. Elon Musk doesn’t understand this. And so they’re risking a national credit default by means not of the debt ceiling but of simple arrogance and incompetence.

These things will continue until the fascist regime is defeated.