THE DEBT CEILING MAY NOT BE A HOUSEHOLD PHRASE, BUT IT AFFECTS EVERY FAMILY
If the United States defaults on its debt, American households pay the price
One of the most obscure issues in Washington is the debt ceiling, and it has a long history. The latest budget showdown in this Congress is repeating the past by raising the debt ceiling in exchange for a particular request – in this case, reducing the deficit. While the debt ceiling may not be a common phrase used in your household, I would like you to know failure to raise the debt limit will impact you and your family.
Currently, there is no argument against raising the debt ceiling – it is a common routine that has been around since 1917. Increasing the debt limit does not equate to more spending – it means we are allowing the United States to pay for its incurred debt. The dilemma rests in the hands of the U.S. House of Representative Republicans, who have been holding the debt ceiling hostage in exchange for an ideological agenda. The threat of the United States defaulting on its debt is alarming and likely to happen as we approach the deadline within days.
By August 2nd, the U.S. Treasury will be unable to pay its incurred debt and will be forced to prioritize payments. The Treasury has never defaulted, ever.
Every month, the Treasury Department makes over 80 million payments. In the event of default, Treasury will have to pick ‘winners and losers’ in choosing who receives funds. First, Treasury must pay our United States interest first - $29 billion. It then becomes a choice at Treasury to prioritize other payments, including Social Security, Medicare, Medicaid, prisons, Pell grants, FBI, Military active duty pay, to name a few.
We are days away from reaching our country’s debt limit, and should we default – American families will pay the price. Here’s how you may be affected:
On August 3rd, the Social Security Administration has a scheduled check send-out of $23 billion to recipients nationally – this includes retired, seniors and those who are disabled. If the debt ceiling has yet to be raised, there is no guarantee that Social Security checks will be sent out. Americans use this benefit as a means to get by, and in some cases it is their only source of income. It is unacceptable for the House Republicans to refuse to raise the debt limit, knowing that the consequences can fall on the backs of our seniors.
If you have a son or daughter who is entering their freshman year at college, you may be affected, as well. Pell Grants are also a payment the Treasury must decide to fund. As the school year begins in August, our college students may not receive their Pell Grants, which pay for their education expenses. Our students are the future leaders of America and delaying their pursuit of advancing their career and being globally competitive in the workforce is not good governing.
Those serving our country overseas and those families serving at our local Air Force bases are at risk for not receiving Military active duty pay. If an entrepreneur wants to take out a loan to start up their small business, thereby creating 10 local jobs – they won’t be able to as the interest rates will see a sharp rise. If your spouse or significant other goes to the grocery store, the price of food will increase, because the worth of the dollar will decline. If you are a small business owner and are expecting the IRS to send you a refund check – that is also not guaranteed. Currently, 9.2 percent of the American population is unemployed and relies on their unemployment benefits to put food on the table or pay their monthly rent, but now, the unemployment benefits are also at risk for being furloughed.
Even a short-term deal that will increase the debt limit for six months will hurt the American people. Middle class Americans, who have already made substantial sacrifices due to the economy, would see their personal finances negatively affected. Owning a home has always been the American dream, but if the U.S. defaults, mortgage rates may increase by $1,000 for the average family. Many Americans use credit cards every day. Interests on credit cards may increase and cost up to $250 on average. The Bureau of Labor Statistics found that food and utility costs would be raised by hundreds of dollars a year. For those families with 401(k)s, all gains made in 2010 and most made in 2009 will be completely depleted and thousands may be lost in retirement savings accounts.
The Republicans in the U.S. House of Representatives must stop playing politics and not hold the debt limit hostage for a political agenda. The seriousness of this issue is evident in the recent market numbers - Dow has gone down 96 points in the past week, putting American families and businesses at risk. We need to get our Republican friends to come back to the negotiation table immediately. Refusing to raise the debt ceiling means we refuse to the pay the bills this country has already incurred and will delay payments and services that American families rely on every day.
We are essentially cutting up our bill and neglecting to pay our obligations – we would not set that example for our children, so the government should not either. I am willing to work with my colleagues on both sides of the aisle for the well-being of your wallet and household budgets and the betterment of our nation.