Failing to raise the U.S. debt limit in time would mean the first U.S. government debt default in history and a list of complications, including a delay in Social Security benefits.
“The federal government would have to significantly cut back spending, [which] would probably mean delaying about $80 billion in payments due November 1 to Social Security recipients, veterans and active duty military for as long as two weeks,” wrote Mark Zandi, chief economist at Moody’s Analytics in a new report.
Furthermore, Zandia added that if progress stalls through the full month of November, the Treasury would have to eliminate a cash deficit of nearly $200 billion, calling the potential economic scenario “cataclysmic.”
In a recent op-ed in the Wall Street Journal, Treasury Secretary Janet Yellen cautioned that “nearly 50 million seniors could stop receiving Social Security checks for a time, troops could go unpaid,” reported ThinkAdvisor.
Additionally, families who rely on the monthly child tax credit could see delays, and “the current economic recovery would reverse into recession, with billions of dollars of growth and millions of jobs lost,” Yellen wrote.
“The higher cost of borrowing would fall on consumers. Mortgage payments, car loans, credit card bills — everything that is purchased with credit would be costlier after default.”
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According to data from Moody’s Analytics and as previously reported by GOBankingRates, Congress has until Sept. 30 to renew the government’s spending authority for the 2022 fiscal year, which begins Oct. 1. The debt limit was reinstated on Aug. 1; however, the Treasury Department was forced to use available cash to pay its bills. Moody’s experts expect funds to be drained as early as mid-October.