Debt ceiling talks: US inches to default with no backup plan

The United States faces dire warnings that political disputes over the debt ceiling could wreak unprecedented economic turmoil. But in a country where almost half of the population depends on government funding to support their livelihoods, few people have any backup plans.

At the base of a tower near the Brooklyn Bridge, six gray-haired men and women gathered for their monthly book club.

Member nations that rely on monthly payments from Social Security, the program for U.S. pensioners, should make sure that President Joe Biden and Republican leader Kevin McCarthy get paid before the U.S. runs out of money to pay its bills. I am concerned about what will happen if no agreement can be reached.

Officials warn that moment could come within two weeks.

But when I asked if they had taken any precautions in case the U.S. defaulted and they didn’t get their Social Security benefits, the elderly people seated around a plastic table gave a deadpan expression.

“That will never happen,” declared 82-year-old Norman Manning. “It will be tragic.”

Manning is not alone in betting on a deal that will allow the U.S. to borrow money.

Despite some signs of anxiety among investors, such as declining demand for some Treasuries, financial markets look generally confident.

Even after the chief Republican negotiator walked out of a closed-door meeting with White House representatives during talks aimed at avoiding a default, stocks dwindled.

But Ian Bremmer, president of political consultancy Eurasia Group, said even if the two sides could agree to a deal, it would likely take a significant amount of squabbling before Republicans in Congress voted in favor. warned it could push the United States into dangerous territory.

“This is going to get worse before it’s fixed,” he said.

The White House warned that without a deal, if the government were to default on its debts, it would seriously disrupt not only the salaries of pensioners, government workers and military personnel, but also government functions. Financial markets are expected to fall into chaos.

Analysts say it could trigger a recession on par with the 2008 financial crisis, which put millions out of work and wiped trillions of dollars of wealth from financial markets.

A recent poll by Ipsos/Reuters found that three in four Americans are concerned about the personal financial impact of such an event.

But dire predictions aside, no one knows exactly what will happen in the event of a default. It also doesn’t provide many clues as to whether or how government agencies are preparing.

When asked whether it warned the more than 60 million people on social security benefits about the risks, the Social Security Administration referred the question to the Treasury Department. The Treasury Department did not respond to a request for comment. So did the Department of Health and Human Services, which administers food benefits for the poor and other programs.

Trade unions representing government workers said their members had received no guidance on what to expect from their workers.

“I don’t think the government itself has any idea what’s going to happen,” said Daniel Horowitz, deputy legislative director of the Federation of American Government Employees, which represents the federal government and the 750,000 Washington, D.C. public servants. “Right now, it’s the Titanic heading towards the iceberg.”

Max Lichtmann, chairman and chief executive of the National Board of Sustaining Social Security and Medicare, said that if any agreement on raising the debt ceiling was a foregone conclusion, the government would not want to alarm seniors unnecessarily. He said he wouldn’t be surprised.

But his organization is still trying to raise awareness among its millions of members and supporters about the potential risks.

“What we tell our members is to save money and have a cushion in case things don’t work out in the coming weeks,” he said.

Robin Worshey, a member of the book club, said if Social Security payments didn’t arrive on time, she would have no choice but to drain her savings. But she “hopes to be optimistic,” she said.

“If you want re-election, you better make up,” she says.

Analysts warn that even a deal could bring economic pain, depending on its content.

Republicans want drastic spending limits and changes to some benefits programs.

Mr. Biden has rejected many of their proposals, but has also laid the ground for compromise, saying, “We are united because we have no other choice.”

Alz Dyker, a home health care assistant in New York, receives government help to buy groceries for himself and his three children. He said he was worried about it.

“It’s scary,” said the 29-year-old man. “It will have a big impact on me.”