Schumer warns debt default could bring disaster to upstate New York

Jan. 25—Senate Majority Leader Charles E. Schumer is warning that if the U.S. government fails to raise the debt ceiling, upstate New Yorkers would feel a tremendous impact to their own wallets and the financial health of their communities.

In a news conference held Wednesday, Sen. Schumer said the effects of a default on the U.S. debt, where Congress does not authorize the Treasury to borrow enough money to pay for costs that have already accrued, would be devastating for nearly every aspect of the U.S. economy.

Republicans in Congress have said they do not want to vote to raise the federal debt limit without also cutting federal spending, while U.S. President Joseph R. Biden and congressional Democrats have said they don't want to risk negotiating over the debt ceiling because the stakes are too high to risk not reaching an agreement in time.

When the U.S. reaches the debt ceiling, it can no longer borrow money to pay for the expenses it has already racked up for federal government operations, or make payments on the debt it's already accrued.

Bond payments, a huge aspect of the U.S. investment economy, would be paused. Federal and military salaries, Medicare and Medicaid payments, Social Security payments could all be stopped.

"A default means real dollars coming out of upstate families pockets," Sen. Schumer said. "Mortgages, car loans, credit card rates will all go up. Moody's predicts that a default could surge new mortgage rates over 8%."

As investments in debt held by the government gets riskier, the cost to borrow money from any financial institution will grow higher. Sen. Schumer warned that a debt default, which has never happened in U.S. history, has the potential to send the entire U.S. economy into a steep recession.

"The money workers have spent their lifetime putting aside could lose billions as a default careens the economy into a stock market crash," he said. "Home values will decline. When mortgage rates go up, home values always go down."

For people who rely on social services like Medicare or Medicaid, SNAP food benefits and other federal entitlements, Sen. Schumer said a debt default would impact their ability to access their benefits, and he warned that some Republican representatives are calling for cuts to federal entitlement programs like Social Security and Medicare in exchange for a debt ceiling lift, putting these programs at even more risk.

"Someone at a local hospital in Binghamton or Watertown, having a routine procedure and their coverage gets disrupted because the government can't make the Medicare payments," Sen. Schumer said. "This and many more things will happen from a default."

For the military, the senator said it's likely the entire Department of Defense would face financial hardship as well, causing problems all the way down the chain to soldiers themselves.

"The military would be slashed because interest rates would go up and we couldn't be paying our debts," Sen. Schumer said. "Some have suggested we just pay the military and nothing else, but that's virtually impossible to do. They talked about that in 2011, and it couldn't happen. So it would have a devastating effect on our military, our soldiers on Fort Drum."

The senator urged residents across New York and the country should make clear to their representatives that the U.S. can not default on its debts, and the debt ceiling must be raised.

"It's our obligation to let people know how bad this is, so they can tell their congressmember, Democrat or Republican, to avoid a default at all costs," he said. "Don't do brinkmanship, don't do hostage-taking, let's just get this done."