WASHINGTON (CBSMiami.com) – Many in the state of Florida rely on Social Security and Medicare as a lifeline, but as the days countdown to a U.S. default, everyone in the Sunshine State has reason to worry.
The latest shot across the bow of Washington came from ratings agency Standard & Poor’s. S&P gave the U.S. a 50/50 chance that it could cut the U.S.’ credit rating if the debt ceiling is not raised soon. Moody’s rating service has already put the U.S. under a negative watch.
If the credit rating of the United States is damaged, it will have a ripple effect into every aspect of the U.S. economy. It would become more expensive for the U.S. to borrow money; a mass sell-off would happen on Wall Street and could trigger a more severe recession than the U.S. is currently battling.
Currently, the U.S. owes roughly $9 trillion to creditors. The other $4.5 trillion is owed to the Social Security and Medicare trust funds. For comparison sake, when Lehman Brothers defaulted and brought down the global economy, they owed $600 billion.
Essentially, the flow of money into the United States could stop and there could be a sell-off of U.S. debt leading to unimaginable consequences for the American way of life.
Once the debt limit is exceeded, the White House would have to decide what payments must be continued and which ones could be delayed. For example, payments to China could be labeled as necessary, while Meidcare payments could be delayed.
In South Florida, where Medicare and Social Security is absolutely crucial to many residents, any stop or delay in payments could force people out of their homes or worse.
Democrats have asked for a tax hike on the wealthiest Americans in addition to over $2 trillion in cuts. Republicans have refused any tax increase for the wealthy and instead seek to gain all the money through deep cuts to programs including Social Security and Medicare.
As the days tick by until the U.S. begins to default on August 2, everyone in every state will be keeping their eyes on Washington and hoping a debt deal can be reached and politics put aside for the sake of the country.