From jobs to housing, what could a U.S. debt default mean for Kentucky?
As talks continue between the White House and congressional leaders about a deal to lift the debt ceiling before next week’s deadline, a fresh report is projecting seismic job losses and jolting housing costs if the U.S. defaults.
According to the centrist political think tank, The Third Way, a default could eliminate 40,000 jobs in Kentucky. The group also estimates that the average Kentucky mortgage would increase by $114,000 if the nation cannot fulfill its financial obligations under the current debt limit.
“A default on U.S. debt not only would devastate our economy and hurt our standing in the world, it would have serious, quantifiable consequences for American families and businesses in every state and district,” wrote Zach Moller, director of The Third Way’s economic program, in the report.
More than 600,000 Kentuckians could miss their monthly Social Security check and about 600,000 risk losing about $20,000 in their 401k accounts, according to The Third Way findings.
In Kentucky’s 6th congressional district, encompassing Lexington, the report tallies an estimated loss of 7,300 jobs along with an average mortgage increase of $114,000 if the U.S. defaults.
The calculations are numbers based on U.S. Census data and numbers from Zillow, a real estate company.
Economists say construction and manufacturing jobs would be the first hit since they are most sensitive to consumer demand. A report from Moody’s Analytics listed Kentucky as a state that would be disproportionately affected by a manufacturing downturn.
Calling it “a hard deadline,” Treasury Secretary Janet Yellin has warned the U.S. will run out of funding to pay its debt obligations by June 1 unless Congress acts to raise the debt ceiling. Senate Minority Leader Mitch McConnell has continually promised the U.S. would not default, but has largely been a bystander in the specific negotiations between Speaker Kevin McCarthy and President Joe Biden.
McConnell believes that any realistic deal needs to be able to first clear the U.S. House, where some number of hardline Republicans are likely to vote against any agreement that has Democrats’ blessing. But he has stood unified with McCarthy on extracting some level of spending cuts from the White House in order to secure GOP votes.
“We have agreed to cut spending,” Biden insisted on Sunday during a press conference.
Yet at the heart of the standoff is the size of the spending cuts Biden and his Democratic congressional colleagues are willing to accept.
A spate of groups in Washington have been attempting to raise the alarm on the effects of partisan brinkmanship over the debt ceiling, a tedious issue for many outside of the nation’s capital.
Climate Power, a coalition of progressive organizations, reports that 142,016 clean energy jobs could be at risk if the nation defaults. The group claims that Kentucky has benefited from 1,503 jobs since nearly $3.3 billion in outlays during the Biden administration.
