What could happen if the US doesn’t extend the debt ceiling

The United States is facing the possibility of being unable to pay its bills due to a political impasse over the debt ceiling. This could result in delayed payments for federal government services such as Social Security, Medicare, tax refunds, military paychecks, and more. The U.S. Treasury bonds are the foundation of the global capital structure and missing payments on these bonds could trigger financial chaos, as investors might panic and dump Treasury bonds, leading to a deep sell-off in stocks. Ratings agencies would likely downgrade U.S. debt, and government borrowing costs would increase, along with household debt linked to the U.S. Treasury market. If the U.S. reaches the X-date without a debt ceiling deal, it would be the first time in U.S. history that the federal government has intentionally reneged on its financial promises. The most consequential payments likely to be affected would be Social Security and money for health programs like Medicare, Medicaid, the Children’s Health Insurance Program, and Affordable Care Act health plans. Other payments that might be affected include federal tax refunds, food stamps, federal retirement plans, education programs, federal salaries, veterans benefits, and payments to defense vendors and contractors.

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