The consequences of an extended federal debt-limit debate will impact everyone. Unless the U.S. government allows itself to borrow more money, it cannot pay Medicare providers, Social Security beneficiaries, tax refunds, military and civilian federal personnel, or the interest on the national debt. At worst, the risk is a global economic crisis, as the world’s interest rates are dependent on the safety and liquidity of America’s Treasuries. At the very least, a U.S. default on its debts will cause substantial financial market disruptions. Just the fear of default causes problems, which is why an extended debt-limit debate is dangerous to everyone’s financial well-being.
In January 2023, the U.S. “hit” the debt ceiling, which is the amount it can borrow under the law. As it has in the past, the U.S. Treasury is using “extraordinary measures” (temporarily borrowing from other funds like the Postal Service Retiree Health Benefits Fund) to cover the bills until an actual default on the debt will occur, which will happen on or around June 1, 2023. It is nearly impossible to predict exactly when default will happen — if it does — because it depends on the unsteady collection of federal tax payments.
- The last time the U.S. was at serious risk of defaulting on its debt was in 2011, when a similar scenario of newly elected House Republicans and a Democrat in the White House could not agree on how to reduce spending. A deal was finally made in the 11th hour, but not before causing a first-time-ever downgrade in the U.S. credit rating and sending the stock market plunging.
- Unless the debt ceiling is eliminated or a more-regular process is created, the consequences of the U.S. coming so close to default are likely to be dire for the global economy. Much of the world’s credit is based on the steady and reliable interest rates of U.S. Treasury bonds. If U.S. Treasury bonds are no longer deemed safe and secure, foreign buyers (mostly China) may invest less or sell them. Interest rates on U.S. Treasury bonds would increase because of the greater risk (the possibility of not being paid back).
- At home, a default is likely to cause a recession. A loss of consumer confidence in the economy causes people to spend less, leading some patients to delay necessary surgical procedures and lowering the stock value of consumer-goods companies. Individuals who depend on Social Security payments may not be able to afford rent or utilities. Parts of the federal government would shut down because personnel deemed nonvital would go on leave without pay. The inability of people to pay taxes would reduce the Treasury’s ability to pay interest on the debt.
Orthopedic surgeons are the third highest-paid physician group in the country, and ambulatory services were the biggest growth area for healthcare jobs this year. Despite this position of relative strength, if the government implements spending cuts or delays Medicare reimbursements, those interventions could strain the cash flow of surgical practices. Until these debt-limit debates are no longer an issue, it is important to identify areas of vulnerability in orthopaedic practices and increase communication with patients so that planned services are not delayed in tough economic times.
Doximity. 2023 Physician Compensation Report. Accessed May 15, 2023.
Buttle R. The Debt Ceiling Showdown: What It Is and What It Means For Business. Accessed May 15, 2023.