People would keep one eye on their bank accounts for missed deposits and the other on Wall Street, where concerns over the nation's creditworthiness could be savaging the value of people's life savings. On June 14, about a quarter of the nation's retirees could check their bank accounts and see that $25 billion in expected Social Security payments were not deposited. Some payments could go out with significant delays. On June 9, $4 billion in salaries could go unpaid for parts of the 2-million-strong federal workforce and schools expecting $1 billion in federal funding could have to do without. Payments could also stop going out to government contractors, including $1 billion due to defense contractors on June 5. "The longer this goes on, the more disruptive it could be," said Tricia Neuman, a health policy expert at the KFF research group. Eventually, hard decisions would have to be made on scheduling surgeries and other procedures without being able to pay for them. healthcare, some doctors might not have money to pay staff and other bills. More Medicare bills would come due in subsequent days, and because Medicare funds about a fifth of U.S. On June 5, they are due about $1 billion in payments through Medicare, America's public health insurance program for older Americans, according to the Bipartisan Policy Center, a think tank that estimates Washington's day-to-day schedule of bills due. More immediately, hundreds of billions of dollars in federal spending could be withheld from the economy.ĭoctors' offices, hospitals and insurance companies could be among the first to get stiffed. The mass layoffs that normally come with recession could be weeks away following a default. REUTERS/Dado Ruvic/Illustration COULD IT GET WORSE? dollar banknotes are displayed in this illustration taken, February 14, 2022. Within days, the financial mayhem would be a principal force putting the economy on the path to recession, Zandi said. Interest rates would increase, making it harder to buy a home or car or borrow money to start a business. "Stock prices would fall, commercial real estate values, house prices. "It would be downright cataclysmic," said Mark Zandi, an economist at Moody's Analytics.Įven if the Treasury paid bondholders on time, as most observers expect it would try to, the political dysfunction driving the crisis would sow distrust in America's economic prospects, and the value of most everything owned by Americans, from their homes to their retirement portfolios, would drop. Missing a payment would trigger a Wall Street meltdown of historic proportions. bonds, which underpin the global financial system. Congress and the White House failed to lift the self-imposed $31.4 trillion legal limit on federal debt, the Treasury Department could start missing payments on its obligations on June 5, according to the department's chief, Janet Yellen.Īt that point, Washington would be under severe pressure to keep making payments on U.S. WASHINGTON, May 30 (Reuters) - What could happen on Main Street if Washington's political showdown over the debt ceiling stopped the government from cutting checks that fund a quarter of the economy?Īmericans could quickly notice painful blows to their retirement accounts as stock markets swooned, and within days the lack of federal payments could weigh heavily on doctors' offices, retirees and workplaces throughout the country.
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