Their view: Default on debt would be catastrophic

U.S. Sen. Tom Udall (D-NM) discusses how a default on the nation’s debt would impact New Mexicans:

“Failure to extend the debt ceiling would be a real crisis for our state, with every New Mexican paying the price,” Udall said.

If the debt ceiling is not raised before the Aug. 2 deadline, federal officials have said that the revenue coming into the government will not be enough to cover its obligations — putting Social Security, Medicare, Medicaid, veterans’ benefits, military payments, student loan payments, and many other government services at risk of being disrupted.

For New Mexico, a government default would mean:

• Social Security benefits for more than 360,000 New Mexicans would be in danger of being disrupted. If the debt ceiling is not raised by the deadline, President Obama would be “forced to make a set of extraordinarily difficult choices about what to pay or not pay. By then, the government’s savings account would be nearly empty and the president would be relying on daily tax revenue” according to the Washington Post.

• More than 300,000 New Mexicans rely on Medicare, and those benefits would be put in jeopardy. In a January letter to the Senate leadership, U.S. Treasury Secretary Tim Geithner warned that Medicare benefits payments “would be discontinued, limited or adversely affected” if Congress failed to raise the debt ceiling.

• More than 174,000 New Mexico veterans would be at risk of having their benefits disrupted.

• Almost 1,000 active-duty military personnel from New Mexico may stop receiving payments for their service to our country.

• Local communities in New Mexico received $27.5 billion — or just over $37,000 per household — from the federal government in 2009. These investments included funding for Social Security, Medicare, grants to local and state governments for law enforcement, transportation and other initiatives critical to communities. With a default, that funding would be in jeopardy. States and localities may be forced to raise property taxes on families if these investments are threatened.

• Mortgage payments would increase by more than $1,000 for the average family. The average monthly mortgage payment in the United States is $1,022. A 75-basis-point hike in Treasury Bond interest rates, as estimated by J.P. Morgan to occur with a default, would raise the average mortgage payment by roughly $85 a month or $1,020 per year.

• Credit card interest would increase by $250 for the average family. Credit card interest payments in the U.S. total approximately $94 billion per year. A 75-basis-point hike in rates would increase this by $5 billion to $99 billion. In 2009, nearly half of Americans had credit card debt, with a median balance of $3,300. That means the average family with credit card debt will pay nearly $250 more in interest.

“It is time to put partisan politics aside and stop looking at this crisis as a political opportunity to score rhetorical points,” Udall said. “It is time to do what is right for New Mexicans. We must increase the debt ceiling, and we must do it by Aug. 2.”