How Does the U.S. Gov't Pay Its Bills?

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Oct. 11 (Bloomberg) -- On today's "The Real Deal," Michael McKee examines the economic risk from failure to increase the debt ceiling. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Debt ceiling in terms of bondholders and whether or not interest rates will rise.

But the stakes are high for the average person as well, because the entire economy is at risk.

You have three different payment systems that pay the bills for washington.

The defense disbursing office.

Bureau of the public debt.

And the financial management service.

Each one of those has an on-off switch.

They want to make sure bondholders get paid.

They can switch up the other two systems so nobody gets paid.

Most of the government would have to close.

That is a big hit to the economy.

A contraction in gdp of about 4% could be seen.

And there is a likely stock market crash.

But that is just the minimum impact.

The actual impact would be a lot worse.

If you look at gdp, the forecast that there talking about for a recession, a bad one, well, what happens when tax receipts fall and the government spends more on the safety net?

The government does not have the money to do unemployment insurance, so they have to cut more.

We could see the economy fall as much as 10%, which would be worse than the great recession.

That is incredible.

What happens to the economy if they settle?

If they sell and they get to the six week time span in settle, most people say it would be a pretty good 2014. if they reach a budget deal, taxes will not be going up like they did this past year.

Theoretically, it will have a better spending profile than the sequester.

Global economies are picking up as well.

The u.s. would grow at an almost 3% rate.

We are coming to that fork in the road.

Take it.

Thank you, michael mckee.

Heading it deal on d.c. -- what would keep the president and republicans from agreeing on the debt limit?

We will ask austan goolsbee in a moment.

And he is america's favorite tv anchor -- ron burgundy is back and is showing for dodge.

We have the fresh numbers on what will ferrell's ad campaign

This text has been automatically generated. It may not be 100% accurate.

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