It’s coming all the way down to the wire for Congress to succeed in a deal on the national debt ceiling before the U.S. government runs out of cash to pay its bills.
Treasury Secretary Janet Yellen warned lawmakers that they’ve until Thursday to resolve the debt limit. Otherwise, the Treasury may have to pay its bills late and the United States could default on its debt – something that has never happened.
What’s more, it might be the ultimate blow that puts the delicate economy in a recession, Yellen said in a letter last week.
Lawmakers are at odds over raising the federal borrowing limit, or the debt ceiling, which allows the U.S. government to make good on its financial obligations. That ceiling, or the quantity the federal government can borrow, stands at $31.4 trillion.
The national debt, the quantity the federal government owes its creditors, was hovering barely above that as of Wednesday afternoon.
Lawmakers squabble as nation nears limit: What happens if the US hits the debt ceiling?
Debt ceiling explainer: U.S. Treasury Department to take ‘extraordinary measures’ as government nears debt ceiling
The Treasury Department can meet certain financial obligations using what Yellen known as “extraordinary measures” through June, The Bipartisan Policy Center estimates.
But there are several programs that can be jeopardized if the debt ceiling is not raised and other measures are exhausted.
Here’s what’s at stake:
Social Security, Medicare and Medicaid
Social Security might be impacted no matter whether the debt limit is raised in time. That is because some Republican lawmakers have signaled they will not raise the debt limit unless it comes with a Social Security funding cut, amongst other spending cuts.
Not all Republican lawmakers are on board for Social Security cuts and Democrats have signaled they don’t seem to be willing to compromise on that front.
But when the federal government defaults on its debt, there might be a lapse within the $90 billion monthly Social Security payments made to 65 million recipients, in accordance with the National Committee to Preserve Social Security and Medicare.
“The Treasury may not have enough incoming revenue to make those payments without the authority to money in … securities,” the Committee said in a web-based post, referring to Treasury securities similar to bonds that the Social Security trust fund invests in. “It’s more likely than prior to now that Social Security beneficiaries will feel the complete impact of a default,” the post stated.
The Committee also said that Medicare and Medicaid payments might be delayed if an agreement is not reached. That might affect the care Medicare and Medicaid policyholders receive since medical centers wouldn’t get timely reimbursements.
Tax refunds
The Internal Revenue Service will begin accepting and processing tax returns on Jan. 23. The IRS said individuals who electronically file their returns should receive a refund, they’re eligible for one, inside 21 days.
However it could take quite a bit longer if the debt ceiling is not raised, Yellen hinted at in her letter.
Tax filing deadlines 2023: Jan. 23 is the primary day you may file your taxes
401(k) impact
If the debt ceiling is triggered, it may lead to instability in financial markets.
Long-term investors should stay the course and never let short-term events dictate their investment decisions, in accordance with Michael Sheldon, chief investment officer and executive director at investment advisor RDM Financial Group at Hightower.
“Like lots of these crises in Washington over the past several years, calmer heads will likely prevail on the last minute,” Sheldon said. “For investors considering long run, who’re putting away money for retirement, this can probably be short lived, so you need to proceed to concentrate on your long-term investment objectives.”
Contributing: Jessica Menton
This text originally appeared on USA TODAY: 2023 debt ceiling deadline: When is it, what happens if it’s reached