Today, Rep. Adam Schiff (D-Burbank) released the following statement about the immediate need to raise the debt ceiling -- the statutory limit of borrowing that must be raised if federal government is to have the capacity to pay its past bills, such as bond holders, Social Security recipients, our military and veterans and other programs:
"As if closing the government down wasn't bad enough, the House Majority is now flirting with additional disaster by risking default on our debt. Unless action is taken by Thursday, markets may plunge, the government will default on payments to creditors and recipients of government payments like social security beneficiaries and veterans, and America's creditworthiness may be downgraded again. A debt limit increase simply allows our country to pay the bills we have already incurred and doesn't add one cent to our national debt. On the other hand, default means higher interest payments, a weaker economy and, ironically, greater deficits and debt.
"The full faith and credit of the United States is non-negotiable. I hope that my colleagues on the other side of the aisle will join the call to raise the debt ceiling immediately and unequivocally, without any extraneous demands on the Affordable Care Act or anything else -- time is running out."
While no one knows the full extent of the economic damage should the U.S. default on its debts, the cost to American families will be significant, potentially resulting in:
Higher interest rates for mortgages, auto loans, student loans, and credit cards, which could force families to cut back on key essentials [JEC,Ways & Means Committee]
o An average homebuyer could pay an extra $100 a month, if mortgage rate spreads increase by as much as during the default crisis in 2011 [Treasury Dept.]
o The cost of college could go up by $1,000 for a freshman who starts school in 2014 and takes out the maximum student loan if the government were to default [Institute for College Advancement and Success , Education & Labor Committee]
Families' retirement savings in 401(k)s dropping as the stock market plummets.
o The average American's 401(k) could drop by $15,000 and the average IRA by almost $23,000, if retirement assets shrink as much as with the 2011 debt limit crisis. The cost would be higher for workers nearing retirement -- dropping an average 401(k) more than $37,000 [Ways & Means Committee,The American Society of Pension Professionals and Actuaries]
o Higher interest rates & less access to business loans needed to finance payrolls, build inventories, or invest in equipment & construction [JEC]
o 3.4 million veterans not receiving disability benefits [JEC]
o 10 million Americans not receiving their Social Security check on time in the first week [BPC]
o Drug reimbursements under Medicare stopping, and doctors and hospitals not getting paid [CNN]