The United States will default on its debt payments for the first time ever if Congress doesn’t act, and the fallout will be immediate in North Carolina.
In about two weeks, the US will default on its debts unless a deal is reached in Congress to raise the debt limit, federal officials say. That’s created real worry that, for the first time in its history, the US will refuse to pay the bills it has already accrued. A default could mean the US would be unable to make Social Security payments, pay members of the military, or issue other funds that large numbers of people depend on. For that reason, raising the limit has always been a bipartisan affair, regardless of the occupant of the White House. But, this year, Senate Republicans have said they will not agree to a long-term deal. (Yesterday, there were some signs that a deal for a temporary lift of the limit could be close.)
The arguments have been largely political.
For example, Republicans in Congress, including NC Senators Richard Burr and Thom Tillis, say they are not cooperating in order to protest Democratic proposals to invest in infrastructure and efforts to fight climate change. But, as anyone with a credit card knows, debt is a reflection of past spending, not future.
Raising the debt limit would pay for initiatives pushed by the Trump administration in 2019 and 20020 and passed by Senate Republicans. Whatever the politics, however, the result of a default are very real.
So let’s look at what will happen to both the economy overall and to us individually if the US defaults and can’t pay its bills.
Millions of North Carolinians at Risk
Here’s a hint: It’s going to be bad.
- The US will likely be unable to pay Social Security to the more than 2.1 million North Carolinians who depend on it. That’s about one out of every five people in our state.
- Active-duty military including those stationed at Camp Lejeune and Fort Bragg won’t be paid after Oct. 18, US Defense Sec. Lloyd Austin has said.
- Medicare and Medicaid payments are likely to stop. In the middle of a pandemic. The longer the default lasts, the more likely these missed payments to healthcare providers could further damage hospital systems and leave people, especially in rural areas, without anywhere to go if they are sick.
- Default could trigger a global financial crisis and devastate 401ks and other retirement funds, with few clear ways to mitigate the damage It’s kind of like the people who refuse the COVID vaccine, then get COVID, go to the hospital, get put on a ventilator, and ask for the vaccine. But, by then it’s too late for that. Same here. The time to avert a financial crisis is now.
- The $250 to $300 expanded child tax credit payments that have been issued since July will also stop. The expanded payments have helped lift 140,000 children in North Carolina out of poverty.
President Joe Biden has been pushing Congress to reach a deal, but Democrats need 10 Senate Republicans to support the maneuvers to raise the limit. So far there are none who have voiced support for a standard extension and neither North Carolina’s Republican Sens. Thom Tillis nor Richard Burr have indicated they’ll break from the party line.
And even if a temporary deal buys a couple of months, the country is running out of time.