economy - and a recession "would seem to be inevitable" under these circumstances, Hamrick said.Ī default, or even the threat of one, would weigh on financial markets and erode confidence among consumers, investors and businesses, causing a pullback in spending and hiring, Zandi said. In that scenario, households would have less cash on hand to pump into the U.S. Initially, payments may come a day or so late - but the delay would lengthen the longer a deal isn't reached, Zandi said. Government functions such as national defense may be affected, if the salaries of active-duty military personnel are frozen, for example. That would affect tens of millions of American households, who wouldn't get certain federal benefits - such as Social Security, Medicare and Medicaid, and federal aid related to nutrition, veterans and housing - on time, the CEA said. If the federal government doesn't have enough cash on hand to pay its bills, the most likely scenario is one in which it prioritizes making debt payments to bondholders - meaning other recipients of federal funds would get a late payment, Zandi told CNBC.
Here are some of the ways it could affect consumers and investors: 1. But one that's short-lived is still expected to do damage, as is a scenario in which the country narrowly avoids default via an eleventh-hour deal. and global economies.Ī "protracted" default would cause "an immediate, sharp recession on the order of the Great Recession," the Council of Economic Advisers wrote Wednesday. were to default, it would send several negative shock waves through the U.S. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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