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What happens if Congress doesn't rein in national debt?

With the national debt at 90% of gross domestic product, the US could face a crisis if creditors raise interest rates, experts say.

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The Senate Budget Committee hears testimony from the cochairs of the National Commission on Fiscal Responsibility and Reform, former Sen. Alan Simpson, right, and former White House Chief of Staff Erskine Bowles, left, on Capitol Hill on Tuesday.

AP Photo/J. Scott Applewhite

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What happens if Congress does not rein in the record $14.2 trillion national debt?

A “crash landing,” cautions one business think tank. “If the US does not put its fiscal house in order, the reckoning will be sure and the devastation severe," said Eriskine Bowles and former Sen. Alan Simpson, cochairs of the president's deficit commission at a Senate Budget Committee hearing Tuesday. The country is "headed for the cliff," said Sen. Kent Conrad (D) of North Dakota, chairman of the Senate Budget Committee at the hearing.

The budget panel's top Republican, Sen. Jeff Sessions of Alabama, speaks with equal urgency. The debt problem "runs the risk of a cataclysmic event, and it can happen very quickly,... just like it did in Greece."

What's a 'cataclysmic event' look like?

The trigger could be something simple, such as the US Treasury offers bonds for sale but there aren't enough buyers. Last year, the Treasury sold $8.4 trillion in securities at relatively low interest rates. But if bidders ever shy away, those rates have to rise. The United States, in effect, would need to pay creditors more to borrow from them. Because of the nation's skyrocketing debt base, the cost of a big rate increase could be ruinous.

"The simplest way is to put it in human terms: Your creditors decide that they don't trust you anymore. Your credit-card rate goes up to 29.999 percent per year," says Joseph Minarik of the Committee for Economic Development, the aforementioned business think tank. "In national terms, the question is: What if the Treasury threw an auction and nobody came?"

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