Pocan Highlights Devastating Wisconsin Impact of a Government Default
WASHINGTON, D.C.—Just two days until the government reaches its borrowing limit and risks defaulting on its loans, U.S. Rep. Mark Pocan (WI-02) today highlighted the severe effects a government default would have on nearly every single Wisconsinite. While certain Republicans have recently claimed that breaching the country’s debt limit would have a minimal impact, a new report from the minority on the Ways and Means Committee confirms what most economists and financial leaders are saying: a default would be devastating to Wisconsin seniors, veterans, students, small businesses and middle class families. Pocan has joined many of his colleagues in calling for clean and long-term action on the debt limit that protects the stability of the U.S. economy.
Raising the debt limit does not authorize new spending; it simply allows the US Treasury to pay the bills we owe.
“This is a manufactured crisis with serious real-life consequences for nearly every Wisconsinite,” said Pocan, a member of the House Budget Committee. “If the stability of our economy and financial markets is threatened, Wisconsinites could see their hard-earned retirement savings lost, seniors and veterans could face delays in the monthly Social Security and disability checks they rely on, and the costs of homes and student loan rates could dramatically increase due to higher interest rates. Refusing to raise the debt limit would constitute nothing short of fiscal malpractice; House Republicans need to stop threatening the full faith and credit of the United States and start working with House Democrats and the Senate on protecting the economic security for all Americans.”
While more than 250,000 Wisconsin residents took out a home mortgage or refinanced their existing mortgage last year, the new analysis shows that mortgage rates could rise dramatically during a default, pushing up overall home loan costs. When Republicans threatened default in 2011, mortgage interest rate spreads increased by 0.7 percentage points. That same increase today would cost families an extra $100 a month, or $36,000 over the life of a typical 30-year home loan.
Retirement savings are expected to fall significantly, potentially costing the average person in Wisconsin a drop of $15,000 in 401(k) assets and almost $23,000 in IRA assets just as they did in July and August 2011, when Republicans pushed the U.S. to the brink of default. More than 1.1 million Social Security recipients here in Wisconsin may not get their monthly checks and 57,745 disabled veterans may not get their pensions as the Treasury Department is unable to borrow. Student loans will cost significantly more. And doctors and hospitals may not get paid for treating patients with Medicare.
The full Wisconsin analysis is available here.