SPRINGFIELD, Ill. (WCIA) – State treasurers and comptrollers across the nation including Illinois Treasurer Michael Frerichs are calling on U.S. House Speaker Kevin McCarthy and other lawmakers on Capitol Hill to take action to reach an agreement on raising the debt ceiling.
Otherwise, they warned in a letter to him sent Tuesday, it could have major consequences for their states, including Illinois.
“I think you could see as many as 240,000 workers in the state of Illinois losing their jobs, at least on a temporary basis,” Richard Funderburg, an associate professor of public management and policy at UIS, said. “In terms of … household wealth, I can imagine about $240 billion lost in household wealth as a result of something like this.”
This month, the U.S. hit its debt limit, the total amount of money the federal government can borrow to pay its current obligations which includes benefits for Social Security and Medicare. That limit stands at $31.4 trillion. The U.S. Treasury Department said it has taken major steps to prevent a default, buying lawmakers until June to reach a deal, but congressional Republicans and the Biden administration are at a standstill.
“Unfortunately, it’s a political leverage point that the minority party always tries to leverage to get what they want that they couldn’t get otherwise,” Todd Maisch, the president and CEO of the Illinois Chamber of Commerce, said. “But it’s the most dangerous game that we play in Washington, there’s no doubt about that.”
In a statement to WCIA, Treasurer Michael Frerichs blamed Congressional Republicans, saying “This is not about fiscal responsibility, this is about whether checks for Social Security recipients and Medicare benefits are paid. Extremist Congressional Republicans are using this routine bipartisan procedure in an attempt to force cuts in social security, medicare, and other programs.”
But Congressional Republicans have said that they refuse to raise the debt ceiling without making major cuts in government spending.
“Republicans were largely elected to get control of reckless spending,” Rep. Don Bacon (R-NE) said.
If the debt ceiling defaults, some people in Illinois would see more of an impact than others.
“Federal employees, recipients of government aid like Social Security, people on Medicare, Medicaid, those would be the most directly impacted, but everybody would feel a little bit of the bite,” Funderburg said.
In their letter, the officials warned of serious consequences for many people and industries from mortgage rates going up and car loans and payments also increasing. They also said people’s pension funds and retirement savings could be greatly hurt.
“Everybody recognizes that we start to default, you start talking about the financial industry, you start to think about transportation funding, all these other things that start to cascade in a really, really bad way.”
Funderburg said there are about 80,000 federal employees in the state, and a default means those workers wouldn’t get paid.
“That would obviously reduce the availability of services,” Funderburg said.