What Is at Stake for Children in the Debt Ceiling Debate

Washington DC has been more active this month than in most summers. Both Houses of Congress have cancelled week long recesses to address the issue of federal debt ceiling limit. According to the Treasury Department, on August 2, 2011, the United States Federal Government will officially hit the nation’s debt ceiling. What will be the impact on kids if the Congress fails to act to raise the ceiling?

If we hit our debt ceiling, the government would owe more per month than it brings in. The Bipartisan Policy Center estimates that the government will owe approximately $306 billion for the month of August while only collecting $172 billion in revenue.

The Treasury could decide to protect selected big government programs. They could pay the interest to our creditors on our debt which cost $29 billion. The government could also decide to pay Social Security benefits ($49.2 billion), Medicare & Medicaid benefits ($50 billion), national regular Pentagon spending on defense (31.7 billion), and unemployment insurance benefits ($12.8 billion). All sensible payments to finance our debt and protect the elderly, unemployed, and not cause us to pay penalties for refusing to honor defense contracts we have signed. This spending amounts to $172.7 billion, leaving no money for anything else.

What would the federal government not be able to afford? Food stamps and nutrition programs ($9.3 billion), military pay ($2.9 billion), veterans programs ($2.0 billion), federal government salaries & benefits ($14.2 billion), and education programs ($20.2 billion), among many other things others. The government could finance the social safety net or normal operations of government. Not both.

Leaving out Social Security payments alone would jeopardize the nearly 1.3 million minors (18 and under) that receive Supplemental Security Income (SSI) as well as the millions of grandparents and retirees that help support their grandchildren. Anyone who receives any federal assistance or payment would be in jeopardy. This could mean the difference between putting food on the table or going hungry.

Do we really want the federal government to make these types of choices? Prioritize Medicare over education? Pay defense contractors but not troops? There is no reason for these choices to happen now. This is a choice made by members of Congress. Interest rates on Treasury bonds are at historic lows. Investors across the globe want to invest in America. The only thing that could stop them is Congressional inaction on the debt ceiling.

If the federal government defaults on its obligations, the following could happen:

    • Millions of families and children will see their benefits eliminated or dramatically reduced. This includes military families, the disabled and infirm, and those in most need of food assistance.

    • Interest rates will rise as borrowing becomes more and more risky. States and local municipalities will pay much more to raise funds for new schools and hospitals. People will pay a higher mortgage for a new home and for a student to go to college.

    • Businesses will pay more to borrow capital for new and existing projects resulting in higher unemployment as businesses lay-off more and have fewer available jobs. Unemployment has a tremendous negative impact on families and children of the unemployed.

    • With shaky credit, the value of the US dollar around the world will drop, which means products that are imported into our country will become more expensive. Clothing, food, gas, or anything produced outside the United States will cost more. Families already struggling will be least able to absorb any increase in costs.

We need your help right now. A deal could come at any minute. Please contact your members of Congress and tell them to prevent the United States government from defaulting and to not cut children’s programs as part of any deal to raise the debt ceiling.