From the Congressional Research Service: >If the debt limit were reached and interest payments on debt were paid, it is not clear what the repercussions would be on the financial markets or the economy. If Treasury had to rely on incoming cash to pay its obligations, a significant portion of government spending would go unpaid. Removing a portion of government spending from the economy would leave behind significant economic effects and would have an effect on GDP by definition, all other things being equal. > >Further, if the government fails to make timely payments to individuals, service providers, and other organizations, these persons and entities would also be affected. Even if the government continued paying interest, it is not clear whether creditors would retain or lose faith in the government’s willingness to pay its obligations. If creditors lost this confidence, the federal government’s interest costs would likely increase substantially and there would likely be broader disruptions to financial markets. Basically, if you define default narrowly as being unable to pay creditors (i.e., debt holders), then, no, we are not going to default on October 17, 2013. But, if you define it as being unable to pay any party to whom you have an obligation, then we are heading towards default. The key point here, in my opinion, is that our inability to meet any obligation is a negative signal. So, not only do we have the negative economic effects of various obligations going unmet (e.g., services provided by the federal government), but we also face the negative signalling effect on global markets' beliefs about the US government. Together, I think those two negative effects are large and warrant a debate-free increase of the debt ceiling.[^1] [via [FactCheck.org](http://www.factcheck.org/2013/10/defining-default/)] [^1]: On a side note, people should stop conflating inability to make debt payments with high leverage. Even in the oft-done but incorrect comparison to households, the US government's leverage is below that of, for example, a home-owning, mortgage-paying American household.