You may have been hearing a lot about the national debt ceiling and the potential consequences if it isn’t raised by June 5th. Experts are warning that failing to raise the debt ceiling could result in a deep recession, both for the U.S. and other countries around the world. It could even lead to a complete meltdown of the global financial system.
So, what should you do if the debt ceiling isn’t raised? We asked economics professors for their insights. While most experts believe that the debt ceiling will eventually be lifted, the question is when. Historically, Congress and the White House have always managed to resolve this issue, but it does create unnecessary drama and uncertainty.
To provide some context, the debt ceiling represents the amount of money that the Treasury can borrow to pay its bills. Typically, a budget is voted into law, and then the two political parties argue over how to pay for it. When one party controls both Congress and the White House, the debt ceiling is usually lifted without much trouble. But when there is divided power, like now with Democrats in the White House and Republicans in Congress, negotiations become more challenging.
If the debt ceiling isn’t raised, the consequences could be dire. Regular people, especially seniors, could feel the impact almost immediately. Benefits for Social Security recipients, SNAP beneficiaries, veterans, and disabled individuals could be delayed. Federal employees and contractors might also experience pay delays. The Council of Economic Advisers warns that over 8 million people could lose their jobs, and the stock market could plummet by 45% in the first quarter after a default.
While some experts believe that a crisis can be avoided and the debt ceiling will be raised, others are more cautious. The economy would be better off if Congress finds a solution sooner rather than later. Currently, it feels like we’re all surfing on a board while sharks swim beneath us, and yet we remain oblivious to the danger.
In the event that the debt ceiling remains in limbo, there are a few things you can do. First and foremost, stay informed and reach out to your congressional representatives. If you rely on government assistance or a government paycheck, it’s wise to start preparing now, even if the chances of a default are low. Saving money and exploring state and local assistance programs can provide some security.
Additionally, familiarize yourself with local resources like food banks, mutual aid networks, veterans support organizations, and faith groups. These organizations can offer support or opportunities to volunteer and donate. If there is a default, many people in your community will need help. You can also contact your representatives directly to let them know how you feel about avoiding or quickly resolving a default.
When it comes to investments, it’s essential to remain calm and avoid making hasty decisions. Selling investments during a potential debt ceiling crisis could exacerbate the situation. However, if you genuinely believe that the debt ceiling won’t be raised in the near future, it might be justifiable to sell some or all of your investments for cash. But keep in mind that this could further harm the economy. It’s best to hold tight and monitor developments before making any drastic moves.
In the meantime, continue budgeting, saving for retirement and emergencies, and staying on top of your financial situation. Couponing can also help save money. While it’s important to plan for the future, remain flexible by booking refundable accommodations and airline tickets for any upcoming trips.
In conclusion, the national debt ceiling is a critical issue that needs to be addressed. Although the likelihood of a default is uncertain, it’s essential to be prepared and informed. Contacting your representatives, seeking local resources, and making sound financial decisions can help mitigate the potential consequences.
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