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“It would be catastrophic for the economy and for individual families,” Yellen said at a House Financial Services Committee hearing.
“Nearly 50 million seniors could stop receiving Social Security payments or receive them late,” Yellen said, echoing what she wrote in a Wall Street Journal op-ed earlier this month . “Our troops wouldn’t know when they would get their next paycheck. We have 30 million families dependent on monthly child tax credits and they would not receive this relief, at least not on time.”
Unless Congress addresses the debt ceiling by Oct. 18, the federal government will no longer be able to borrow to pay for its operations, forcing it to limit spending. Although the House has twice passed measures to do so, the effort is expected to fail again in the Senate, where Republicans are united in their opposition to the bill.
What this would mean for Americans remains uncertain as Congress has intervened to increase, extend or revise the definition of the debt limit in the past. The Treasury Department could still pay some of its bills because it would still have tax revenue, but it is unclear what it would decide to pay and when, experts said.
Social Security recipients would run the risk of not receiving their payments for the first time since the program was created in 1935, said Max Richtman, CEO of the National Committee for the Preservation of Social Security and Medicare. . They are expected to receive $ 90 billion in payments in October.
RELATED: These Government Benefits Would Be At Risk If Congress Did Not Raise The Debt Ceiling
Some 40% of beneficiaries depend on monthly checks for at least 90% of their income, and two-thirds of beneficiaries depend on infusions for at least half of their income, he said.
“Not having a check for a few weeks or a month is devastating,” Richtman said. “The beneficiaries will have to decide: do I pay my rent? Do I buy food? Do I buy my medication?
Additionally, millions of parents who are expected to receive three more monthly payments of the Enhanced Child Tax Credit this year may also have to wait for funds if they default.
RELATED: Some Parents Miss September Child Tax Credit Payment
The Internal Revenue Service is expected to send about $ 15 billion in payments on the 15th of every month, and many families depend on the money to buy food and items for their children. Parents receive up to $ 300 for each child up to age 6 and up to $ 250 for each age 6 to 17.
Meanwhile, more than 42.3 million Americans who receive food stamps could be left waiting for their monthly benefits – an average of $ 227 per person.
A default and prolonged stalemate could also have major implications for the national economy, with federal spending cuts potentially triggering a downturn comparable to the Great Recession, according to Moody’s Analytics. Nearly 6 million jobs could be lost, stock prices could fall by a third and around $ 15 trillion in household wealth could evaporate.
CNN’s Matt Egan contributed to this report.
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