Administration officials, economists, and experts have repeatedly warned for months that failure to raise the $14.3 trillion debt ceiling by August 2 would be the end of the world as we know it and the U.S. economy could fall back into a recession.
But what would the damage look like in individual states?
State governments rely on the federal government for between 25 percent and 50 percent of their revenue. Its unclear which state service programs, such as health care services or emergency fire services, would be cut, but a new interactive map from the Center for American Progress, a left leaning think-tank, takes a look at how much revenue would be lost in each state under two doomsday scenarios.
Scenario one assumes that the Treasury Department continues funding Social Security, Medicare, Medicaid, Defense, and unemployment benefits, but nothing else. Scenario two exchanges defense funding for safety net programs like food stamps, housing assistance, and special education grants.
The results weren’t pretty. 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. Ouch! Under scenario one, twelve states would lose more than $250 million in federal funding per capita, with the majority coming from the Midwest. Under scenario two, seven states would lose more than $200 million in federal funding per capita.
The bottom line: regardless of how the Treasury Department would prioritize payments, each state stands to lose hundreds of billions in federal funding if the debt ceiling isn’t raised.
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