The Broader Market

by Jordan Eizenga

If Congress fails to raise the debt limit before August 2 the United States’s credit rating will almost certainly be downgraded and interest rates will jump. Without the ability to borrow, the federal government will have no choice but to immediately cut the payments it is obligated to make by 40 percent. This will threaten Social Security benefits, active-duty military pay, Medicare and Medicaid payments, and all other federal activities, from law enforcement to education to health care. The American economy will quickly be plunged back into recession if the federal government is unable to meet a significant portion of these obligations.