Those payments include Social Security, Medicare, Medicaid, federal salaries, food stamps and more. “The most direct effect is that some people who are owed money from the federal government may not get paid,” Shai Akabas, director of economic policy at the Bipartisan Policy Center, told USA TODAY. The Treasury department makes millions of payments a day, all of which would be in jeopardy if the government runs out of money. Social Security, Medicare, federal salaries at risk if U.S. Stay in the conversation on politics Sign up for the OnPolitics newsletter And it’s widely agreed that financial and economic chaos would ensue,” she said. “We would simply not have enough cash to meet all of our obligations. economy.Ĭonsequences could include “defaulting on interest payments that are due on the debt or payments due for Social Security recipients or to Medicare providers,” Treasury Secretary Janet Yellen said on ABC’s “This Week.” Because the country has never defaulted on its obligations, it is unclear how deeply it would affect the U.S. President Joe Biden met with top congressional leaders Tuesday to discuss an impending, first-of-its-kind default as debt ceiling brinkmanship continues in Washington. Time is dwindling for lawmakers to raise the debt ceiling before the country runs out of money to pay its bills − something that has never happened before but could happen this year as early as June 1. The ONS said UK credit and debit card spending showed a slight increase of 2 percentage points over the seven days to 4 April, including an increase in delayable and social spending.Watch Video: What happens if the US hits the debt ceiling? Here's what we know. However, figures from the Office for National Statistics (ONS) on Thursday indicated little reduction in appetite for spending so far. With inflation gathering momentum, and eye-watering price rises for many of the essentials, it has forced more of us to borrow to make ends meet.”Ĭredit card borrowing jumped by £1.5bn in February to £59.5bn, the highest since records began in 1993, stoking concern that low-income households were turning to expensive forms of lending to cope with the rising cost of food, clothing and fuel.Įconomists have said the cost of living squeeze will drag down consumer spending later this year, weighing on the economic recovery from Covid. “Demand for loans and credit cards boomed at the start of this year. Sarah Coles, senior personal finance analyst at the financial platform Hargreaves Lansdown, said borrowing was likely get more difficult in the coming months. However, poorer families endured a bigger financial hit, and are expected to bear the brunt of the cost of living emergency this year. Wealthier households managed to save billions of pounds between them during the pandemic as lockdown kept people away from shops and stopped them taking overseas holidays. The Bank of England is widely expected to raise interest rates when its monetary policy committee meets early next month, with the inflation rate now more than three times its official target of 2%.Īlthough average wage growth has picked up in recent months, it is failing to keep pace with soaring inflation, and is expected to contribute to the biggest squeeze on household disposable income since records began in the 1950s. Official figures showed UK inflation soared to 7% in March, the highest rate since 1992, while economists have said the measure for the annual jump in the cost of living is likely to breach 9% this month, the highest since 1982, during Margaret Thatcher’s first government. The pressures of the cost of living crisis are pushing up demand for credit, especially in the unsecured lending and credit card spaces, while the same inflationary pressures, along with rising interest rates, are quelling demand for discretionary borrowing,” he said. “Significant portions of the UK population are falling into financial difficulty, with families at the lower end of the income scale being hardest hit. Paul Heywood, the chief data and analytics officer at Equifax UK, the consumer credit agency, said the figures reflected a worsening situation that had been developing for several months. However, it also suggested lenders were not concerned about losses despite the anticipated rise in default rates. The details from its quarterly “credit conditions” survey of the UK’s biggest banks and credit card providers showed expectations of an increase in demand for consumer borrowing in the months ahead.
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