Congressman Jim Himes outlined today what exactly is at stake if Congress fails to raise the debt limit. Should Congress fail to act by Thursday, October 17, the resulting default will force homebuyers to pay more on their mortgages, drain funds from workers' retirement accounts, delay Social Security checks and disabled veterans benefit payments, increase the cost of student loans, and force doctors and hospitals who treat Medicare patients to go without compensation.
"Make no mistake: the consequences of failing to raise the debt limit by Thursday are dire," said Himes. "The full faith and credit of the United States should never be used as a bargaining chip. With only 24 hours to go and so much at stake, it is well past time for my colleagues in the House Majority to set aside their partisan demands and agree to a clean raise of the debt ceiling."
Yesterday, Himes spoke on the House floor urging his colleagues to get serious about raising the debt limit. Click here to watch a video of the speech.
If Congress fails to act and the federal government defaults on its loans, Connecticut will be affected in the following ways:
Higher Mortgage Costs: If a default increases mortgage interest rate spreads by .7 percent, the average homebuyer will pay an extra $100 a month, costing families $36,000 over the life of a typical 30-year home loan.
Lost Retirement Savings: Retirement accounts -- including pension funds, 401(k) plans, and Individual Retirement Accounts (IRAs) -- are at risk with a government default because much of them are invested in the stock market. Private pension balances are already 26 percent lower than they would have been if House Republicans hadn't threatened to default in July 2011. If retirement assets shrink that much again, it will drop the average 401(k) by $15,000 and the average IRA by almost $23,000. The cost would be worse for workers nearing retirement, dropping an average near-retirement worker's 401(k) by more than $37,000.
Delayed Social Security Checks: If Republicans force a default, more than 10 million of the 58 million Americans who rely on Social Security won't get their checks on October 23. This includes many of the 640,000 Connecticut seniors who rely on Social Security.
Delayed Benefits for Disabled Veterans: If the debt ceiling is not raised, the nearly four million disabled veterans who receive monthly payments in recognition of their service and sacrifice -- including 21,613 in Connecticut -- will not get their benefits on November 1.
Higher Student Loan Costs: Even a brief default might increase the cost of college. For a freshman starting school in 2014 and taking out the maximum annual student loan, their costs are estimated to jump by about $1,000, increasing loan payments by 10 percent. A longer default could increase payments by $2,000.
Possible Shock to Medicare: In the event of a default, the Treasury will be unable to pay the doctors and hospitals that take care of Medicare beneficiaries. This will likely affect the 580,000 Connecticut seniors and disabled workers who rely on Medicare, as these doctors may start turning away patients.