October 23, 2015
possible government shutdown is yesterday’s news – at least until Dec. 11, when
the current continuing resolution expires.
That’s all about
keeping the government running.
The new looming
crisis concerns the country’s debt limit, which the Treasury Secretary says the
U.S. will hit around Nov. 3.
Why is that
spending exceeds revenue every year, and we have to make up the difference by
borrowing – i.e., selling government bonds.
America can borrow is limited by statute. So when we hit the debt limit,
Congress must raise the debt limit to allow additional borrowing, or else
America will default on its obligations.
general consensus among government leaders, economists, and wall street
insiders that a default would be very, very bad in many, many ways.
credit rating would be hurt, which would mean higher interest rates on
everything from student loans to credit cards, cars and mortgages.
The stock and
bond markets would take a big hit, which means your 401(k)s, IRAs, and
investments would, too.
Most of all, it
could very well hit currently serving and retired military and federal
civilians where it hurts most – in the paycheck.
Hitting the debt
limit and defaulting doesn’t mean all government payments would stop.
would still have money coming in…just not enough to pay all of its current
So who/what will
still get paid and who/what won’t?
believe bondholders would be first in line for payment. But then some level of
priority would have to be established among Social Security, Medicare, active
and retired federal workers and military, government contracts, Medicaid
payments to states, student loans, etc.
At that point,
it’s all about the politics and the level of pain.
are most vital to the country? Whose screams of pain will be thought most
likely to get Congress off the dime and raise the debt limit? Someone,
somewhere in the federal government is likely starting to make those
assessments, just in case.
But nobody at
this point can say for sure whether current troops, retirees, veterans, survivors,
or Social Security annuitants will get paid or will see their checks held up
during a default period. It’s all possible.
There’s no doubt
the debt limit will end up getting raised one way or another.
strongly it must be done before we hit the last available day.
for the country are simply too dire to be playing Russian roulette with a
Please send your legislators a MOAA-suggested message urging them to get this
important job done.