President Biden and Republicans in Congress have not made much progress on raising the debt ceiling — that’s the limit on how much money the United States can borrow.
San Diego State University professor of economics Hisham Foad explained why it matters if it's not raised.
“We're going to come up short of meeting all of our obligations — whether it be interest on debt that we owe,” Foad said. “But also everyday things like Social Security and Medicare payments, paying the salaries of people in our military, meeting our obligations for government contracts.”
Time is running out — the $31.4 trillion ceiling has already been reached. If Congress fails to act, the government could default as early as June 1.
Foad said even a week of delay could have catastrophic effects.
“Basically we're going to have to start making some decisions about what to prioritize," he said. "It's almost certain that the Treasury Department is going to prioritize meeting their debt and interest payments first.”
The San Diego Food Bank is one San Diego organization that could feel the impact. It receives 20%-30% of its food supply from federally funded programs.
The political stalemate on the debt ceiling could lead to cuts in their food quantity and increase the number of people they need to serve.
“Now if we have bigger issues with the debt ceiling, and they start cutting CalFresh, SNAP, it could mean a lot more people are going to be looking for food assistance from us,” said Vanessa Ruiz, San Diego Food Bank's vice president of operations.
Ruiz said something similar to this has happened before, during the partial government shutdown in 2018 and 2019, and it impacted San Diegans.
“We were serving additional folks that never came to our food distribution such as the Coast Guard. We had other military branches that were coming to our doors, asking for food assistance — whether temporarily or indefinitely until they could get back on their feet,” she said.
Foad said it's likely that an agreement on the debt ceiling is reached in time, but it's important to brace for the worst case scenario.
That includes federal budget cuts and a serious hit to the overall economy. He said that would lead to a recession.
