This Article examines how a U.S. debt default might occur, how it could be avoided, its potential consequences if not avoided, and how those consequences could be mitigated. The most realistic default would result from rollover risk: the risk that the government will be temporarily unable to borrow sufficient funds to repay its maturing debt. The United States, like most governments, routinely finances itself through short-term debt, which is less expensive than long-term debt. But this cost-saving does not come free of charge: it increases the threat of default. A U.S. debt default—even a mere “technical” default such as temporarily missing an interest or principal payment—would have severe economic and systemic consequences both domestically and worldwide. Such a default would also raise a host of legal issues, including questions of first impression under the Fourteenth Amendment to the Constitution.
Steven L. Schwarz, Rollover Risk: Ideating a U.S. Debt Default, 55 B.C.L. Rev. 1 (2014), http://lawdigitalcommons.bc.edu/bclr/vol55/iss1/2