President Biden meets with House Speaker Kevin McCarthy, R-Calif., in the Oval Office of the White House on Monday. The U.S. can seem like the country that cried debt ceiling, but many say this year, the country might actually default. What happens to the economy and to regular people if it defaults? And, of course, the same warnings everywhere: That a U.S.
For some people, that’s something they can live with. A default may earn the U.S. a black eye in terms of its reputation, that thinking goes, but it could be the kick in the duff that the U.S. government needs to actually get spending under control. A poster at a bus shelter in Washington, D.C., on May 21 shows the national debt. The U.S. is facing the prospect of default as political leaders race to clinch a deal to raise or suspend the debt ceiling. Currently the country can borrow up to $31.4 trillion.
Investment bank UBS estimates the S&P 500 could fall by at least 20%. Bond markets would tumble, and that would send borrowing costs higher across the economy including for already-high mortgage rates. Wolfers says if the U.S. defaults and there’s no more money to spend, the government suddenly wouldn’t have cash to run basic operations, things like schools and roads.