The Aftermath of Failed Debt Ceiling Negotiations – How it Affects Your Pocket

Written on 05/24/2023
Jamaal Benner

If you have been tracking the news lately, you must have heard about the ongoing debt ceiling negotiations, which seems to be a hot topic for the lawmakers. The current situation regarding the US debt ceiling isn’t good, and we’re on the brink of experiencing the failure of these negotiations between President Joe Biden and Speaker of The House Kevin McCarthy. While it might seem mundane, it can have a significant influence on your daily life. In 2018 The 116th Congress and President Trump could not agree on an appropriations bill to fund the federal government’s operations, which caused a 35-day shutdown. Let’s break down how failed debt ceiling negotiations can impact your pocket.

Increase in Interest Rates – Anytime there’s a lack of consensus between the lawmakers regarding the nation’s debt limit, it can drive up the interest rates, which means that borrowing money will become a lot more expensive. This, in turn, leads to higher interest rates for credit cards, loans, mortgages, and other forms of lending, which ultimately means that you’ll be spending more money to pay back borrowed funds. This can make it difficult for people with an already high debt service ratio.

Government Shut Down – Worst-case scenario, if the debt limit isn’t raised, our government will come to a halt. A government shutdown would mean that non-essential government services will be closed down. This includes Social Security, national parks, and other critical state services. The result is that millions of Americans will be without jobs or their pay could be delayed.

Devalue of Investments – Your savings and investment portfolios will also be exposed to risks if the debt ceiling negotiation fails. As a consequence of higher interest rates and inflation, the stock market can become extremely volatile. The devaluation of equities and the weakening of 401K savings will negatively impact American families’ financial stability.

Ripple Effects – Undoubtedly, failing debt negotiations will disrupt the economic system and the market’s stability, and its impact will spill into different areas of life. It’s not uncommon to see corporations scaling down their operations and laying off workers due to diminished consumer spending, or seeing investors holding back their investments to wait for market stabilization. The effect of a failed debt ceiling negotiation will gradually spread out, affecting more people, and in turn, worsen the economic environment harder on the average American individual.

Sometimes, negotiating the nation’s financial policy might seem removed from the everyday lives of most Americans. However, it affects everything from the prices of goods to stocks, and even our jobs. It’s essential to acknowledge how failed debt ceiling negotiations can impact everyone’s pocket, primarily Black Millennials and GenZ, who are just establishing their financial foundation. Nevertheless, it’s crucial to stay informed and be mindful of policymakers’ decisions about the US’s fiscal outlook and how it influences our lives. Creating a financial plan and preparing for contingencies that navigate our finances through times like these is always advisable.