U.S. Debt Ceiling May Affect Regular Americans

The U.S. debt cap surpassed $31.4 trillion in January. Lawmakers and finance professionals are concerned, but most people don’t know how it will affect them.

Congress and the White House have not reached a debt ceiling agreement. Treasury Secretary Janet Yellen said the Treasury Department could start missing debt payments on June 1.

How would the U.S. debt ceiling problem start?

Washington would be pressured to pay bonds. These bonds underpin global finance. Missing a payment would cause a historic Wall Street disaster. “It would be downright cataclysmic,” said Moody’s Analytics economist Mark Zandi.

Stock markets may decline. Americans’ retirement portfolios were devastated. The need for more federal funds may affect businesses, retirement complexes, and medical facilities within days.

Even if the Treasury paid bonds on time, political dysfunction would cast doubt on the American economy. Home values and retirement funds would fall for most Americans. Raising interest rates would make buying a home, car, or business harder. Financial turmoil caused a recession in days.

Widespread Layoffs Expected

Recession-related layoffs may take weeks after a default. Federal spending of hundreds of billions of dollars may be eliminated immediately.

Hospitals, doctors, and insurance companies can be targeted first. As of June 1, they owe Medicare roughly $47 billion.

Some doctors need more funds for personnel and other expenses. Medicare supports about 20% of U.S. healthcare spending. With money, scheduling surgeries and other procedures is more accessible.

Government contractor payments, including the June 2 $1 billion defence contractor payment, may also stop. A segment of the two million-person federal workforce may receive less than $4 billion in compensation on June 9. Government money may only reach schools after $1 billion. Some payments may arrive quite late.

Thus, ignoring the U.S. debt ceiling has far-reaching effects. The global financial model and Americans would suffer.