Joe Biden and Kevin McCarthy have a deal on debt. What happens if Congress doesn’t pass it?

Here’s the good news as the debt limit battle rages on: Social Security and Supplemental Security Income beneficiaries due payments this week will receive them as scheduled.

SSI beneficiaries, usually people with limited incomes and resources, will be paid Thursday. Older Social Security recipients, who began receiving benefits before May, 1997, should get their money Friday. Other Social Security benefits are paid later each month, and their fate in June and beyond depends on whether Congress reaches a deal.

Any doubt about this week’s payments, though, ended when Treasury Secretary Janet Yellen moved back the so-called “X date” — the day the government will have “insufficient resources” to pay its bills — from June 1 to June 5.

President Joe Biden and House Speaker Kevin McCarthy are furiously trying to sell their deal to increase the debt limit for two years, a package that includes spending cuts and other policy changes. After clearing its first procedural hurdle Tuesday, the measure is scheduled for a vote in the Republican-led House Wednesday. If it passes, the Senate should vote by the end of the week.

The impact of any congressional stalemate on most people is likely to be gradual. Even if there’s an impasse this week, most economists don’t see the sort of prolonged Washington impasse that would trigger the most serious consequences.

“I don’t see an Armageddon scenario,” said Mark Schniepp, director of the California Economic Forecast in Santa Barbara.

But as the Biden-McCarthy plan crawls through the Byzantine congressional process, uncertainty remains about the economy’s future. If the deal is not approved quickly, here are some of the most likely scenarios:

Social Security

Most Social Security recipients are scheduled to get their benefits this month starting later in the month. Older recipients and SSI beneficiaries get benefits at the start of the month. Other retirees get their payments on a schedule later each month that depends on their date of birth.

“If this deal falls through or is delayed and a government default happens, it could impact those Social Security beneficiaries who are supposed to receive payments after the default date. Even if all we’re talking about is a delay, you could end up with significant hardship on a large number of people,” warned Dan Adcock, director of government relations and policy at the National Committee to Preserve Social Security and Medicare, an advocacy group.

Some Republican lawmakers have urged the government to set up a system where Social Security payments would be a priority as money comes into the Treasury, but Yellen said that prioritizing would be difficult.

A proposal by Rep. Tom McClintock, R-Elk Grove, would create several tiers of payments. Yellen called it an “incredibly risky and dangerous idea and it has never been tried before. I cannot give any assurances about the technical feasibility of such a plan.”

The average Social Security retiree got $1,785.94 in April.

Jobs

The 153,000 federal employees working in California would probably remain on the job during a debt breach, though their pay could be deferred. Air traffic controllers would keep planes flying, the military would stay on duty, and so on.

The loss of prompt pay and benefits could create a ripple effect that would hurt companies and services that rely on federal workers, says Moody’s Analytics, a nonpartisan economic research firm.

Even if the standoff lasts a week, Moody’s estimates about 68,000 jobs could be lost. Most likely to be affected are firms that rely heavily on federal workers and contracts, notably around military bases, said Adam Kamins, senior director at Moody’s.

Investments

Politicians have warned that Individual Retirement Accounts, 401(k)s and other investment funds would suddenly be at risk of losing value.

Markets dropped somewhat last week in anticipation of a debt limit breach before rallying on the news of a Biden-McCarthy deal.

If uncertainty about the debt limit deal grows, experts expect a shaky market response.

Fitch, one of the three major credit rating agencies, put the U.S. government on a “rating watch negative” last week, meaning it is closely eyeing whether the government can maintain its creditworthiness.

In 2011, the last time Washington went to the brink over approving a new debt limit, Standard & Poor’s downgraded the government’s credit rating for the first time ever. The S&P 500 dropped in mid-year, though it rallied and recovered by the end of the year.

Last week’s market drops, though, were not extreme, and Schniepp said people should not worry.

He noted the Dow Jones Industrial Average, a measure of 30 of the nation’s leading publicly traded companies, has been steady or slightly up all year.

“We don’t see the market selling off,” Schniepp said.

Interest rates

The negative credit ratings and any continuing uncertainty about the fiscal path ahead are likely to push interest rates on all sorts of loans higher.

But consumers need not suddenly run to buy houses or cars. Analysts see rates going up if the debt battle goes on and on.

“With current rates already trending towards 7% again, I wouldn’t rule out an…..increase, which would put rates closer to 8% as a result,” said Jordan Levine, vice president and chief economist at the California Association of Realtors.

A consumer who buys an $815,000 home in California–the median statewide price last month—would pay $5,275, including taxes and fees, if they put down 20%. At 8%, that payment would rise to $5,721.

Prices

This is one area where the possibilities are not so grim.

The annualized rate at which prices have increased has been slowly dropping, from a national peak of 9.1% in June 2022 to 4.9% in April. California prices were up 7.3% last year.

This year, the UCLA Anderson Forecast said in March price increases should average 3.8% in 2023 and 3% in 2024.

If a recession hits, the increase inches up to 3.9% this year and 3.1% next year. While the cost of borrowing money would go up and supplies could become tighter, demand is also likely to diminish, boosting incentives for sellers to keep prices stable.