A look at the programs that could be affected if the US defaults on its loans

tThe United States may face an economic crisis in June if Congress fails to raise the debt ceiling before the deadline, which will affect many US households and government programs.

The US reached its debt limit in January and will need to raise the debt ceiling or come up with a workaround by June to avoid defaulting on its loans for the first time in US history.

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It is not clear when the default will happen, but Treasury Secretary Janet Yellen notified Congress on Monday, confirming that it could happen as early as June 1.

She wrote, “If Congress fails to increase the debt limit, it will cause great hardship to American families, damage our global leadership position, and raise questions about our ability to defend our national security interests.”

Treasury Secretary Janet Yellen, left, listens as President Joe Biden speaks about food security on December 15, 2022.

Susan Walsh/AP

A default does not mean that the federal money will never come but that some programs and benefits may be delayed. There is no blueprint for exactly what would happen in the event of a default because the state has never tested one before.

If an agreement cannot be reached in time, here is a look at government programs that could be affected:

1. Social Security Payments
About 66 million retirees, disabled workers, and others rely on Social Security payments to fund parts of their lives.

Nearly two-thirds of beneficiaries rely on Social Security for half of their income, and 40% of beneficiaries rely on payments for at least 90% of their income, according to the National Commission on Preserving Social Security and Medicare.

072315 Social Security Now

Social Security supporters attend a rally in the Dirksen Senate Building on Capitol Hill.

Somodevilla chips

If the United States defaults on its loans, some of the checks may fail to be raised. However, safeguards were put in place that could help the Treasury send payments through the program’s trust fund. But it is not clear whether the amount will decrease or payments will be delayed.

“Even a short delay in paying Social Security benefits will be a burden to the millions of Americans who rely on their earned benefits to pay for health care, food, rent, and utilities,” the National Commission’s CEO, told CNN.

2. Veteran benefits
Another group that could be affected by default are American veterans and the $12 billion a month benefit payments that are supposed to be made to them. Payments for those with disabilities, recipients of educational grants, health care for veterans and their families, and pensions could be affected by the looming crisis.

“There are people with very low incomes, sometimes fixed incomes who rely on these payments as a lifeline to pay for housing, pay for food, pay for children and family members,” Cole Lyle, a US Marine Corps veteran, told NPR. others”. “So that’s probably very crippling. There’s no benefit that comes from default, whether for veterans or active duty members or other Americans who depend on benefits from the United States government.”

Active military members could also see a delay in receiving their paychecks if the United States defaults. Lyle also said it could cause US residents who depend on the government to turn to credit cards instead, which are expected to raise interest rates if the economy takes a hit.

3. Medicare/Medicaid
A default could cause serious problems for federal health care programs if the government doesn’t have the funds to pay for it.


Demonstrators block a street during a demonstration against a Republican Senate bill in 2017 to replace former President Barack Obama’s health care bill.

(Rick Bomer/AP)

There are two major federal and state health care programs that can be affected. Medicare is a federal program for 65 million people in the United States that pays for health care for people age 65 or older and younger people with disabilities. Medicaid is a larger state and federal hybrid program that reaches 93 million people nationwide. Helps provide insurance for low-income people, including children, the disabled or pregnant, and the elderly.

People rely on both programs to cover costs associated with hospital stays, long-term medical treatments, and even prescription drug prices.

4. School lunches and other government programs and benefits
Another area that could take a hit from a lack of federal funding is public schools, including school lunch programs. Although the school year is largely over, schools could also lose out on billions of dollars for high-needs students, special education services, and English language instruction if the United States breaches the debt ceiling before July 1, according to the Education Bulletin. Education Week.

Other programs that could be affected are SNAP Housing Assistance and Food Assistance.

5. Other possible effects of default on US families
Since defaults take a lot out of the US government, the country’s credit rating is likely to see a downgrade as well. This could upset the American economy and cause interest rates to rise, making it difficult for ordinary people to borrow money.

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It can also hurt the labor market and lead to higher unemployment. But the amount of damage will depend on how long the default lasts.

If the default lasts about a week, nearly a million jobs will be lost, and the unemployment rate will jump to about 5%, according to Moody’s Analytics. However, if the default extends to six weeks, the US could see more than 7 million jobs lost, and the unemployment rate could climb above 8%.

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