How would a U.S. debt default play out in Texas?
How would a U.S. debt default play out in Texas?
June 1 is fast approaching. That’s the date Treasury Secretary Janet Yellen said the U.S. government could run out of money to pay all its bills if the country’s leaders do not reach a deal to lift the debt limit.
The default would be catastrophic for the U.S. economy as a whole, experts say, but of course it would play out differently depending on where people live. Moody’s estimates that half a million jobs would be lost just in Texas, the country’s second-largest state economy and, in fact, one of the biggest economies in the world.
The first move economists say they expect the U.S. government to make if it can’t pay its bills is to cut Social Security payments.
“There are 4.5 million Texans that are either getting a retirement payment, a disability payment or some sort of survivors income from that,” said Patrick Jankowski, with the pro-business Greater Houston Partnership.
So, more families would have to choose between paying for rent, medicine and groceries, according to Tanya Treece with Houston nonprofit BakerRipley.
“We have some seniors that we serve right now that are already food insecure. And so that’s going to be exacerbated,” she said.
Rice University economist Zach Bethune said that if the U.S. defaults, the impacts would ripple across financial markets.
“Stock prices would fall, it [would] make interest rates on mortgages and credit cards and auto loans increase,” he said. “So it’d be hard, you know, more difficult to borrow. That would then kind of create a financial contagion, increase unemployment.”
He said the dollar would also depreciate, though Bethune argued there may be a tiny silver lining for Texas on that front, being a net exporter and all.
“Our oil would be cheaper, our energy would be cheaper in other parts of the world. That may actually help Texas kind of withstand some of the brunt of a recession,” he said. When asked how he would characterize a default situation — a flat tire or a car crash — Bethune said: “It would be where your check engine light comes on. There’s certainly a problem, the longer you wait to actually check the engine, the whole car may go.”
Even so, Texas Association of Business CEO Glenn Hamer said the consequences of a default would be so bad, he’s sure politicians will avoid it.
“We’ve seen this movie before,” he said, adding that it’s like his favorite film, “Top Gun: Maverick.” “I sense that things were going to come down to the end. I also sense it would work out OK. For Maverick and the good guys.”
Things may look like they’ll crash and burn — but Hamer said people will still see a happy economic ending.
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