This Latina Financial Guru Explains Why We Need to Follow the U.S. Debt Default Debate
In recent weeks, the news waves have been littered with talk about the impending debt default that is looming over the United States. For many Americans, much of the jargon being used can seem confusing, daunting, and somewhat scary.
For this, we contacted Linda Garcia, a Latina stock market analyst and author, to ask her what exactly folks needed to know about the U.S. debt default.
Garcia tells People Chica, "It is important for us to be clear that the money needed for the debt was already approved and that this process is being highly politicized. It's important not to get emotionally caught up in the process but to observe what is taking place for what it actually is."
The Chica Boss also detailed who would be affected if the debt ceiling wasn't increased by the June 1 due date.
Many folks have been hearing about the United States debt default in the news lately, and it's not the first time the media has spoken about it. What does it mean for the U.S. government to default on its debt payments?
Given inflation, high-interest rates, a volatile stock market, and elections around the corner, the debt ceiling is getting a lot of exposure in the media and potentially causing worry. The debt ceiling has been politicized in recent years. It is important for us to know that the debt ceiling has been raised consistently since 1960. Forty-nine times under Republican presidents and 29 times under Democratic presidents.
Raising the debt ceiling is not to take on new debt but instead to pay the debt that was already authorized. The United States government defaulting on its debts is similar to us not paying a credit card bill resulting in an outstanding payment and money being owed. This has implications for the rating of our national debt, like a credit score.
In 2011, we were downgraded in our rating from the highest AAA to AA+ because of our mounting debt by Standard & Poor's, which rates the credit of countries and companies based on letter grades. The most recent downgrade was alarming to the world as it indicated that the stability of American policymaking had weakened.
If the U.S. doesn't pay up by the deadline of June 1, what and who will be affected by it?
Raising the debt ceiling is currently under high-pressure negotiations by both parties that can't seem to come to a resolution on raising the debt ceiling. We are set to go into default by June 1, and this can potentially hurt the American people. Some of the bills include Medicare, Medicaid, Social Security benefits, education programs, and SNAP, to name a few. We also risk going into a government shutdown and our credit rating being downgraded.
The outcome of both parties not coming to an agreement and hurting the country in this way is highly unlikely to happen. Still, as negotiations become more strenuous, people are beginning to worry. President Biden has mentioned that he would invoke the 14th Amendment if it came to this, which would enable him to raise the debt ceiling on his own.
Under the 14th Amendment, the argument would be that it is unconstitutional for the U.S. to fail to make payments on money owed. The 14th Amendment states that "the validity of the public debt, authorized by law, shall not be questioned." Biden also acknowledged that invoking the amendment would have drawbacks.
You're someone who helps people learn to navigate money and heal their money trauma. Is there anything people can do to soften the outcome of a possible default?
It is important for us to be clear that the money needed for the debt was already approved and that this process is being highly politicized. It's important not to get emotionally caught up in the process but to observe what is taking place for what it actually is. There is a system at work here, and we should pay attention to how each side of the aisle plays the system.
Are there any lessons folks can take away from something like this regarding money management?
The government, like us, also has responsibilities and parameters that they must abide by when it comes to spending and borrowing money, or there will be consequences. This highlights the importance of our own responsibility in managing our household money. It also shows how emotional money can be not only for us but for those running our country.
This is something we need to work on and focus on the fact that money is simply a tool. Therefore, I also would be careful with comparing our own experiences with something that is being politicized.