In normal times, at the beginning of each month, the federal government makes a cash advance to the Social Security Trust Fund called the 'normalized tax transfer,' in an amount equal to the estimated payroll taxes for the coming month.

If investors avoid the Treasury market, we could be unable to pay off maturing securities, which would mean an immediate default. Market participants generally agree that even a brief default would create potentially catastrophic risks to the financial system, like the meltdown of 2008.

The United States has never prioritized or failed to pay any obligation when due during a debt limit impasse. Despite the institutional risks and the lack of clear legal authority, we assume that Treasury will attempt to prioritize payments in a last-ditch effort to avoid default.

Jerome Powell Quotes