September 22, 2021
What could really happen if the US defaults on its debts and Congress doesn’t raise or suspend the debt ceiling?
It can’t be that bad?
Ehhhh…depends on what you think is bad. I know lots of you gloss over this because you think it doesn’t impact your everyday life – but it does.
Let’s run down the real consequences if Congress doesn’t pass a bill to raise or suspend the debt ceiling in the next couple of weeks.
The US government would not be able to pay salaries, or benefits for federal or military personnel, retirees and contractors. Social Security, Medicare and Medicaid benefit payments would stop. So would tax refunds, child tax credit payments, student loan payments and payments to keep all government facilities open.
Interest rates would increase – that means increased costs for corporations and small businesses, state and local governments, credit card interest rates, mortgages and car loans, and the cost to import goods would skyrocket and all of this will also contribute to more inflation.
Your retirement accounts in the stock market take a hit.
The value of a dollar drops on the world stage and world markets also take a hit.
Experts say a “mild recession” would be the best-case scenario. The worst case – millions of jobs lost, unemployment rates would increase, again, a near-freeze in credit markets and gross domestic product taking a tangible hit that could last for multiple quarters. A government shutdown would pale in comparison to this.
Here’s the other thing — if investors only *think* the US *could* default, the consequences could be almost as bad as an actual default. Because u-s debt is seen worldwide as the safest investment anywhere. And if investors get skittish a huge revenue source dries up.
Treasury Secretary Janet Yellen says we actually hit the debt ceiling back in August but the Treasury Department has been floating all these government programs since then by using what’s called “extraordinary measures.” Those measures run out she says in mid-October.
The fact is – Congress has increased the debt ceiling more than 75 times in the last 50 years. And the situation we’re in today is a result of congressional actions that happened years ago – things like a series of regular spending bills passed with bipartisan support, the existing spending promises for Medicare and Social Security, the 2017 tax cuts, and several large pandemic-related relief bills that were passed during the Trump and Biden administrations.
PLUS
A CDC advisory panel will come up with a recommendation and vote tomorrow on who exactly should qualify to get a Pfizer Covid19 vaccine booster shot and when.
Just moments ago, the FDA approved the recommendation it was given by its independent advisory panel last week. Today’s decision by the FDA only applies to the Pfizer Covid19 vaccine booster. It is authorized under emergency use for those over the age of 65, those ages 18-64 who are at high risk of severe Covid19 and those ages 18-64 whose frequent institutional or occupational exposure to Covid19 puts them at high risk of serious complications of Covid19.
But who exactly qualifies as “high risk”?
That’s exactly what the CDC advisory panel discussed during its meeting today. That meeting continues tomorrow and wraps up with the group voting and issuing a recommendation.
We’ll have to see what happens tomorrow.
Read the FDA approval for Pfizer boosters here.
