5 ways your finances could be impacted if the debt ceiling isn’t raised by the deadline

It’s coming down to the wire for Congress to reach a deal on the national debt ceiling before the U.S. government runs out of money to pay its bills.

Treasury Secretary Janet Yellen warned lawmakers that they have until Thursday to resolve the debt limit. Otherwise, the Treasury will have to pay its bills late and the United States could default on its debt – something that has never happened.

What’s more, it could be the final blow that puts the fragile economy in a recession, Yellen said in a letter last week.

Lawmakers are at odds over raising the federal borrowing limit, or the debt ceiling, which allows the U.S. government to make good on its financial obligations. That ceiling, or the amount the government can borrow, stands at $31.4 trillion.

The national debt, the amount the government owes its creditors, was hovering slightly above that as of Wednesday afternoon.

Lawmakers squabble as nation nears limit: What happens if the US hits the debt ceiling?

Debt ceiling explainer: U.S. Treasury Department to take ‘extraordinary measures’ as government nears debt ceiling

The Treasury Department can meet certain financial obligations using what Yellen referred to as “extraordinary measures” through June, The Bipartisan Policy Center estimates.

But there are several programs that would be jeopardized if the debt ceiling isn’t raised and other measures are exhausted.

Here is what’s at stake:

Social Security, Medicare and Medicaid

Social Security could be impacted regardless of whether the debt limit is raised in time. That’s because some Republican lawmakers have signaled they won’t raise the debt limit unless it comes with a Social Security funding cut, among other spending cuts.

Not all Republican lawmakers are on board for Social Security cuts and Democrats have signaled they aren’t willing to compromise on that front.

But if the government defaults on its debt, there could be a lapse in the $90 billion monthly Social Security payments made to 65 million recipients, according to the National Committee to Preserve Social Security and Medicare.

Story continues

“The Treasury may not have enough incoming revenue to make those payments without the authority to cash in … securities,” the Committee said in an online post, referring to Treasury securities such as bonds that the Social Security trust fund invests in. “It is more likely than in the past that Social Security beneficiaries will feel the full impact of a default,” the post stated.

The Committee also said that Medicare and Medicaid payments could be delayed if an agreement isn’t reached. That could affect the care Medicare and Medicaid policyholders receive since medical centers would not get timely reimbursements.

Tax refunds

The Internal Revenue Service will begin accepting and processing tax returns on Jan. 23. The IRS said people who electronically file their returns should receive a refund, they’re eligible for one, within 21 days.

But it could take a lot longer if the debt ceiling isn’t raised, Yellen hinted at in her letter.

Tax filing deadlines 2023: Jan. 23 is the first day you can file your taxes

401(k) impact

If the debt ceiling is triggered, it could lead to instability in financial markets.

Long-term investors should stay the course and not let short-term events dictate their investment decisions, according to Michael Sheldon, chief investment officer and executive director at investment advisor RDM Financial Group at Hightower.

“Like many of these crises in Washington over the past several years, calmer heads will likely prevail at the last minute,” Sheldon said. “For investors thinking long term, who are putting away money for retirement, this will probably be short lived, so you want to continue to focus on your long-term investment objectives.”

Contributing: Jessica Menton

This article originally appeared on USA TODAY: 2023 debt ceiling deadline: When is it, what happens if it’s reached