Earlier this week, US Treasury Secretary Janet Yellen warned the US Congress in a letter that debt ceiling negotiations needs to end in a deal before Thursday, June 1st.
"With an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government's obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1."
We are one week away from the debt ceiling deadline. However, negotiations between US President Joe Biden and US Speaker of the House Kevin McCarthy remain at an impasse with seven days to go before the US economy goes kaput.
The US has never intentionally defaulted on the US debt. America has always paid its debts since the debt ceiling was enacted in 1917. A default to the US economy would be absolutely catastrophic. Here are some of the things that will happen if there is a default.
- People on Social Security could possibly not receive their checks in June.
- Medicare and Medicaid could possibly be affected.
- Supplemental Nutritional Assistance Program (SNAP) could possibly be affected.
- Checks to federal employees and to the military would be delayed.
- Benefits to veterans could possibly be affected.
- One-tenth of US economic activity would be halted.
- US could lose their good credit rating.
- People could lose an average of $20,000 on their 401K retirement savings.
- US could lose three million jobs.
Here are some things that you can do in order to protect yourself if a debt ceiling deal is not done by June 1.
- Go to the grocery store before June 1. Prices on food items will skyrocket if there is a default. Any type of economic crisis leads to inflation. We also saw what happened to grocery store shelves when things were disrupted during the pandemic.
- Make sure you have cash on hand. Three banks collapsed earlier this year: Silicon Valley Bank, Signature Bank, and First Republic Bank. A default could possibly lead to your bank closing. Fortunately, the FDIC makes payments on insured deposits within two business days. However, those are two business days in which you would not have access to your money.
- Protect yourself. Remain alert because times of crisis leads to people committing acts of violence due to desperation. Homicides went up 30% in the US during the COVID pandemic.
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