Government officials, business leaders and economists are raising the alarms about the potential impasse, saying not addressing it in a timely manner would be disastrous. The financial hit would come at a time when many families are still struggling to recover from the economic turmoil of the pandemic, with one-quarter of Americans saying they struggled to pay their bills in the last week, according to new data from the Census. That would result in hardship for millions of Americans, from the 40% of seniors who rely on Social Security for their sole source of income to those who might lose their jobs in another recession. and global economies, which still have a long way to go to recover from the recession caused by the pandemic, will descend back into recession." government pays what it owes in a timely way," he wrote in the research note. economy and global financial system is that the U.S. Meantime, mortgage rates and other interest rates for things like credit cards and auto loans would spike.įailure to resolve the impasse could unleash "chaos," Zandi warned on Tuesday. And stock prices would likely plunge by one-third, sparking that $15 trillion loss in household wealth. Also, come November 1 checks for millions of Social Security recipients would be delayed, Zandi noted.
In real terms, the nation would soon return to high unemployment rates, approaching 9% compared with its current rate of 5.2%. would be unable to pay interest on the trillions it already owes and could default - something that has never happened in the nation's history. If the amount of government debt hits that threshold without lifting the ceiling by current mid-October deadline estimates, the U.S. The debt limit is the maximum amount the U.S. The fallout would wipe out as many as 6 million jobs and erase $15 trillion in household wealth, he estimated in a report. economy could plunge into another recession this fall if Congress fails to lift the debt ceiling and the nation is unable to pay its obligations, according to an analysis by Moody's Analytics chief economist Mark Zandi. However, you are likely, in your personal finances, to be affected if the U.S. We like to think that the troubles of politicians wrestling with questions like this are so far removed from us. (On the flip side, those of us still quite a ways from retirement might just go on a bargain buying binge.) And, of course, no matter how you slice it, higher taxes are probably coming. However, all that work would be undone if a default threw the stock market into a huge plunge. Many people’s investment portfolios have begun recovering from the last crisis. You may have survived the last round of job losses, but could you survive another?Īnother possibility is that you could see your retirement account take another hit. And, with small to medium sized businesses struggling with cash flow issues, another round of lay offs could be seen. This means that your ability to get a loan for a car or a home, and even for an education, will be compromised, and small business will have a hard time getting the loans they need.
Other interest rates might be affected as well, as dollar-denominated debt in general becomes more expensive.Ī credit market crunch - worse than what we saw after the 2008 financial crisis - is likely to be a reality in the event of a U.S. Treasury bond rates would likely skyrocket, and the mortgage rates that are influenced by long-term Treasury rates could also rise.
debt immediately becomes more expensive to finance. Other impacts could come due to another stock market crash in the financial markets. Plus, there will be a number of people in the cold, since a default would trigger a rather harsh system of deciding who gets paid first, and that could affect some individuals in terms of government programs, employees, and even Social Security payments to those on fixed incomes. debt default would likely result in an economic slowdown, damaging a recovery that is already quite fragile. We can’t know what will happen until we actually reach that point. After all, the financial markets run largely on perception. Of course, nobody can say, for sure, what would happen in the event of a default. credit rating from its sterling AAA rating? (S&P is threatening to cut the rating straight to a D if the debt ceiling isn’t raised in time.) Laying aside the potential halt to government projects that you might have an interest in seeing completed, there might be some more immediate impacts of a U.S. But, what does it matter to most ordinary people? Are you really going to be affected if the government can’t borrow more money, and if Moody’s cuts the U.S.
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