Media Coverage

How a Default Could Devastate the Country

07/25/2011 - As negotiations over a major deficit reduction package appear to be going nowhere over the weekend, federal and state officials, financial and corporate executives, and average investors and consumers suddenly face the very real threat of the first-ever default on U.S. debt, a possibility that once seemed unthinkable.

President Obama signaled late Friday that the government was preparing for the worst if he and House Speaker John Boehner, R-Ohio, fail to reach agreement before August 2, when the Treasury begins running out of money to pay creditors and meet other obligations.


Even if a deficit reduction package is reached, it might include significant cuts to federal Medicaid spending, which would also shift significant program costs to states at a time when they can least afford it, according to Moody’s Analytics.

“If the government stopped paying federal workers or held back Social Security checks, the resulting loss of individual income could have a profound effect on state and local tax revenues,” according to a report from the Pew Center for the States.

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States' Fiscal Health

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