The federal government and the American Congress have yet to reach an agreement regarding the increase of the country’s public debt ceiling. As a result, the risk of an unprecedented default is growing. With no legislative proposal to vote on, lawmakers are leaving Washington D.C. this Friday (26) for the extended weekend due to the Memorial Day holiday on Monday. Consequently, House Speaker Kevin McCarthy does not guarantee that an agreement will be approved by June 1, the date by which, according to the Treasury Department, the country may begin to run out of funds to pay its bills.
If the debt ceiling is not raised in time, the Treasury and the White House will have to make tough decisions about which bills to pay with the available resources.
The U.S. has never failed to pay its bills before. In fact, over the past 45 years, Congress has adjusted the debt ceiling more than 60 times.
But what could a default mean for the global economy and American families?
If the U.S. defaults, it could undermine faith in the government’s ability to pay all its bills on time, plunging the global economy into chaos. This has never happened before, so it is difficult to predict what could actually happen, but experts believe that:
• The U.S. harms its position in the global economy – The U.S. dollar could weaken, undermining its central role in world trade.
• Social Security – Payments to 66 million retirees, disabled workers, and others could be delayed.
• Stock market decline – Stocks could lose up to a third of their value, wiping out about $12 trillion in household wealth.
• Borrowing costs – Default could increase yields on U.S. Treasury bonds, raising interest rates on loans, credit cards, and mortgages, making it harder to obtain lines of credit.
• Recession – A default could trigger an economic crisis, resulting in the loss of millions of jobs.
• Federal funding – Federal funding that goes to states and municipalities for Medicaid, highways, and education, as well as food stamp benefits and payments to Medicare providers, may not be paid on time.
• Federal employees – Paychecks for federal and military employees, along with payments to federal contractors and veterans’ benefits, could be delayed.
Source: CNN