Investors balance risk with expected return when deciding where to put their money; the greater the risk, the higher interest rate they demand.
The baseline for this is the ‘risk-free’ rate, for investments which have zero risk of default. US Treasury investments are used in these calculations - they don’t pay much interest, but they don’t miss payments.
Once again, some politicians are playing chicken with our nation’s finances for political ends. A refusal to raise the debt ceiling risks a default on payments for money we have already borrowed. Investors will continue to fund our debt, but even the threat of a default will lower our nation’s credit rating, making borrowing more expensive.
It’s childish and dangerous - and exactly what we can expect from those running Congress for the next two years.
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