In the event of a U.S. debt default, how would Texas be affected?

June 1st is drawing near, and it marks the day when the US government may run out of money to pay its bills if a deal to raise the debt ceiling is not made. Treasurer Secretary Janet Yellen has warned that a default could have devastating consequences on the entire US economy. This would play out differently depending on where people live, but Texas would be hit particularly hard. Moody’s estimates that half a million jobs would be lost in Texas alone. The state is the second-largest economy in the US and one of the world’s largest economies.

Economists are predicting that the first step the US government would take if it can’t pay its bills is to cut Social Security. Approximately 4.5 million Texans receive retirement or disability benefits, or some survivor income from them. Many families are now forced to choose between rent, medicine, and groceries, according to Tanya Trees of Houston nonprofit Baker Ripley. Some seniors they serve are already food insecure, and it will get worse if the US defaults.

The repercussions of a US default would ripple through financial markets, according to Rice University economist Zach Bethune. “Stock prices will fall. Interest rates on mortgages, credit cards, and auto loans will rise,” he said. “So it’s going to be harder to borrow money. It’ll cause a kind of financial contagion and increase unemployment.” However, Bethune argues that there could be a small silver lining in that oil will be cheaper, and the rest of the world’s energy will be cheaper too.

Glenn Hamer, the Texas Business Association CEO, is confident that politicians would avoid defaulting on debt because the consequences would be so bad. Despite the risk, he believes that things will end up working out. “I’ve seen this movie before,” he said, likening the situation to the movie Top Gun: Maverick. “I had a feeling things would end up working out. I also have a feeling it’s going to work out. For Maverick and the good people.” Hamer believes that people will still have a happy ending financially.

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