Veterans benefits, Social Security and Medicare payments, and SNAP could be among the first federal programs at risk if the US defaults in 10 days, a new analysis says
- The US could default on its debt in as soon as ten days if Congress doesn't raise the debt ceiling.
- The Bipartisan Policy Center estimated which federal programs would be at risk in the days following a default.
Last week, the think-tank Bipartisan Policy Center published an analysis on the federal programs that would be at risk in the first days and months following a default on the nation's debt. Treasury Secretary Janet Yellen warned Speaker of the House Kevin McCarthy that the US could run out of money to pay its bills as soon as June 1, but even with the severe time crunch, McCarthy and President Joe Biden have yet to reach an agreement on raising the debt ceiling before that deadline.
The US has never defaulted on its debt, so no one can say with certainty what will happen once the government can no longer afford its spending obligations. But the Bipartisan Policy Center used daily Treasury statements, which it said are "subject to significant uncertainty and variability of cash flows," to estimate which federal programs could be among the first at risk in the event of a default.
In the first ten days of June, the government could be unable to afford the following programs:
- Veterans benefits
- Social Security
- Tax refunds
- Military retirement
- Federal salaries
- SNAP benefits
- And education programs.
Along with the daily Treasury statements, the analysis is based on historical financial data, a Congressional Budget Office analysis of spending and revenue growth, and adjustments for changes in revenue and spending due to the pandemic aftermath and inflation.
Yellen has not yet indicated how the Treasury would plan to prioritize certain payments should the US default, but she reiterated to NBC on Sunday that "we expect to be unable to pay all of our bills in early June, and possibly as soon as June 1st. And I will continue to update Congress, but I certainly haven't changed my assessment. So I think that's a hard deadline."
"If the debt ceiling isn't raised, there will be some hard choices to make about what bills go unpaid," Yellen said.
As the Bipartisan Policy Center noted in its analysis, fulfilling all payments for popular programs like Social Security and Medicare "would quickly become impossible," and prioritizing certain payments would be operationally difficult and involve "sorting and choosing from hundreds of millions of monthly payments."
Mike Konzcal, director of macroeconomic analysis at the think-tank Roosevelt Institute, said on a Monday press call that "hitting the debt ceiling, even just the prospect of it, is a grave threat" to the economic recovery the US has seen throughout the pandemic.
"Even approaching the deadline has negative financial market consequences of excessive stock market volatility and increase in the cost of credit, and the threat of credit downgrade," Konzcal said. "But it's not just financial markets that would suffer. Any kind of default will put major stress on the rest of the real economy. Social Security payments would immediately be delayed. This would cause hardship for many and immediately cause consumers to panic, stop spending, and slow the economy, threatening major recession."
Biden and McCarthy are set to meet on Monday evening to attempt to reach a deal on raising the debt ceiling and ensuring the government can continue to afford vital programs for Americans. Importantly, a deal needs to be reached as soon as possible to allow the legislative process to carry out — even if a bill is written up, it could take days until passage due to amendments and votes.
Progress in Monday's meeting is critical, and meanwhile, pressure for Biden to pursue alternate paths that could avoid a default — like invoking a clause in the 14th Amendment that would declare the debt ceiling unconstitutional — will likely build.
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