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Those getting federal benefits could lose out if government defaults on debt

INDIANAPOLIS (WISH) — The U.S. Treasury Department says the country could default on its debt if the White House and Congress can’t agree on raising the debt limit by June 1.

“It’s just a limit on what our debt can be” said Michael Hicks, director of Ball State University’s Center for Economics and Business Research. “If you have a credit card, you have a debt limit of $5,000, and once that happens, you can’t charge anymore.”

Hicks estimates around 67 million Americans receive Social Security benefits. They may not receive those benefits if the government can’t pay its debt.

Medicaid recipients, Medicare recipients, and members of military may also not get paid.

“I was a young Army officer, and we actually bumped pay into the next month, so everybody wasn’t paid for several days. That’s happened before, and it could certainly happen again.”

Hicks adds that the military could cut certain training programs in lieu of not paying service personnel if the government defaults.

Vince Shorb, chief executive officer of the National Financial Educators Council, said, “Anybody on those government-type programs, be prepared and sock away what you can. This will continue to happen in the future, and it’s important you are prepared for that.”

The National Financial Educators Council helps combat financial illiteracy and helps people make informed financial decisions.

Shorb adds you should reach out to someone you know who receives federal benefits to make sure they’re prepared. Retirees living off their stock values would also be hurt by a government default.

If the stalemate over the debt ceiling continues into the summer, it could thrust the country into a recession.

Hick said, “Think about the countries that have defaulted, and you’re listing a bunch of failed states: Zimbabwe, Peru and Argentina in the 1980s.”

Nonprofits that receive government grants could also lose funding if the government defaults, which could lead to staff furloughs.