![]() Fewer commuters depresses occupancy levels in office buildings, and also affects traffic for commercial sites such as shopping malls and entertainment venues, making them less profitable bets for investors.Ī painful mix of downward pressure on asset prices, higher borrowing costs, and tighter lending by regional banks is especially bad news for the commercial real estate industry, which is heavily reliant on debt financing from smaller lenders. The shift to remote working since the pandemic also poses a threat to commercial real estate values. They may also be more wary of lending given the prospect of a recession, pressure on their asset portfolios, and the increased risk of loan defaults when rates are higher. Moreover, after mass withdrawals of customer deposits caused major problems at several banks this year, smaller lenders are pulling back in fear of further bank runs, raising the prospect of a credit crunch. Because of that reduction in what’s known as “intragovernmental debt,” the payments have little net effect on the total amount of debt subject to the limit.Steeper rates also erode the relative appeal of real estate to investors because they boost the yields from bonds and savings accounts. But the payments reduce the balance in the trust fund, which consists of Treasury securities, according to the Congressional Budget Office. When it comes to Social Security, Treasury obtains cash to pay benefits by borrowing from the public. But since the nation hit its $31.4 trillion debt ceiling, it cannot add to its borrowing until Congress addresses the cap. Since the US takes in less revenue than it needs to pay its bills, Treasury must borrow to cover all its obligations. Though it’s not known exactly how the Treasury Department will handle making payments with the funds it has on hand, the agency may ultimately decide to prioritize Social Security benefits – though likely after it has paid interest and principal on the nation’s debt.Īlso, it’s possible the Treasury Department could continue making on-time payments because of the entitlement program’s trust fund, said Shai Akabas, director of economic policy at the Bipartisan Policy Center. It is possible that Social Security beneficiaries could be shielded somewhat from the full impact of the US defaulting on its obligations. “I am very, very concerned about what this will do to our financial industry, as well as to our benefits,” she said. Download icons in all formats or edit them for your designs. These free images are pixel perfect to fit your design and available in both PNG and vector. Red vintage alarm clock falling on the floor with bright yellow background in pastel colors. Get free Alarm bell icons in iOS, Material, Windows and other design styles for web, mobile, and graphic design projects. warning sign, police alarm, ambulance alarm, Medical alert. Many are not only concerned about their benefits, but also that a potential stock market drop triggered by a default could decimate their retirement savings. Download 7008 free Alarm bell Icons in All design styles. Older Americans are more aware of the debt ceiling battle – and the potential delay in payments – this time than they were during the last major standoff in 2011, thanks to the internet, said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League. He has tried to reassure folks that they will receive their full benefits eventually. “If you depend on your Social Security for most of your living expenses, you’re not going to be able to pay your rent, buy your food, pay your utilities, the basics … pay out-of-pocket health care costs that may come up.” “A lot of people in Washington are not that in tune with what this could mean,” he said. But that’s not possible for many recipients. Max Richtman, the committee’s CEO, has been telling members to try to set aside some money to have a little cushion if their June benefits don’t arrive on time. The average benefit for retired workers is $1,827 a month in 2023. Many senior citizens are already growing worried, especially in the past week or so as the deadline grows closer, advocates say.Īlmost two-thirds of beneficiaries rely on Social Security for half of their income, and for 40% of recipients, the payments constitute at least 90% of their income, according to the National Committee to Preserve Social Security and Medicare. ![]() Here’s how we know a US default would be an economic disasterīut if the debt ceiling impasse is not resolved, those benefits could be delayed, along with paychecks to federal workers and the military, payments to Medicare providers, and federal grants to states and municipalities for Medicaid, highways, education and more.If US defaults on its debt, Treasury would have to decide how to pay the bills.How the 14th Amendment factors into the debt ceiling debate.Five ways a debt default could affect you.
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