This article was created by americanprogress.org
If Congress fails to raise the debt limit on August 2, the federal government will be forced to immediately cut nearly 40 percent from its budget and Florida would lose billions of dollars in state services.
While it is not known which state programs would be cut, the Bipartisan Policy Center or BPC, has outlined two scenarios for how the Treasury Department might prioritize payments for certain programs over others if the debt ceiling isn’t raised.
Under the first, Treasury prioritizes payments on big-ticket items and continues to fund Social Security, Medicare, Medicaid and defense. Under this scenario, Florida could lose $2.34 billion on state services which the federal government funds. These include employment and training programs, emergency fire services for rural communities, health care services and more.
In the second scenario, Treasury still protects Social Security, Medicare, and Medicaid, but swaps out defense for important safety net programs such as food stamps and special education grants. In this case, the BPC estimates that Florida will lose $1.42 billion if the debt ceiling remains frozen throughout August and September.
Beyond the implications for states if the debt ceiling is not raised, the United States will have its credit rating downgraded and interest rates will likely rise dramatically. Furthermore, the American economy could likely be plunged back into a deep recession. The damage will be enormous, and no sector of the economy will be immune—least of all, the states.
Altogether, states could lose up to $56 billion in funding just in those two months under the first scenario and $36 billion under the second. No state would be spared by these cuts. Each stands to lose hundreds of millions of dollars in federal funding if the debt limit isn’t increased regardless of how Treasury decides to prioritize payments.
By Michael Linden, Jordan Eizenga
