With the debt ceiling looming just days away, there is a lot of coverage and talk about the effects America defaulting on its debt will have on the global economy if our government does not raise the debt ceiling. Our nation’s leadership has been unable to come to an agreement for the last two weeks and Americans are wondering how the government shutdown will end and when an agreement can be made to raise the debt ceiling. While most Americans know the debt ceiling situation is bad, many may not fully understand the real effect it could have on their own lives. The effects may not be felt immediately, such as the loss of jobs or immediate financial impact. Not raising the debt ceiling will greatly affect economic growth and as a result affect American people over time.
To conceptualize how hitting the debt ceiling will affect average Americans can be felt in a variety ways. First, government payments for programs such as unemployment, food stamps, Social Security will cease. Now, while not all average Americans depend on these programs, many have family and friends who do. There may be an unemployed sister waiting for that welfare check to come in the mail, or a grandparent depending on their Social Security. As a result, close family and friends who are dependent on these government checks are going to be in need of financial help from you.
Another way an average American might feel the effects of not raising the debt ceiling will be when trying to buy a house. If the government hits the debt ceiling, it will send interest rates on U.S. Treasury bonds through the roof. Since mortgage rates are tied to interest rates on treasuries, they too will rise exponentially. Therefore, taking a loan out for a down payment will now incur much higher interest rates, possibly resulting in not being able to afford that dream house anymore.
Lastly, another result further down the road could be the actual loss of employment for many average Americans. Factor in that many Americans will no longer receive food stamps, unemployment checks, or Social Security would then result in many people spending less money at their local stores. Spending less money at the local stores will mean less need for workers and eventually the firing of many employees. While this result is very far down the road, it is a real possibility of how the average American could be affected by the lack of leadership in government right now if they are not able to come to an agreement and raise the debt ceiling.
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