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US debt default: five ways it would affect you

The United States will almost certainly not default on Oct. 17. Although the federal government will have run out of authority to borrow more money, the US Treasury will have roughly $30 billion on hand to pay its bills for the next several days and, if it chooses to delay some payments, a few days more. But somewhere between Oct. 22 and Nov. 1, it will have to make hard choices about who to pay and who not to pay, according to the Bipartisan Policy Center, a nonprofit think tank in Washington. Here's how default and even the threat of default could affect you as a retiree, consumer, investor, and so on:

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Demonstrators in Philadelphia form a symbolic chain in July to protest a proposed change in the formula for determining cost-of-living increases in Social Security benefits. Social Security payments equal 5 percent of the national economy, so a stoppage of payments or even a delay would ripple through the economy.

Matt Rourke/AP/File

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1. Retirees: delayed Social Security payments

More than 60 million Americans collect Social Security payments and Social Security income checks, which are staggered through the month, depending on the recipients' birthdays. Once US borrowing authority expires on Oct. 17, the first payments – some $12 billion – go out to recipients on Oct. 23. The Treasury has some $30 billion on hand to cover that, but after that it becomes dicey.

The next payments – some $25 billion – are supposed to go out Nov. 1, according to the Bipartisan Policy Center. The same day, another $3 billion is due from another Social Security program, Supplemental Security Income, which supports disabled adults and children with limited income.

With such a large number of Americans receiving those checks, not paying them would have huge implications politically and also economically. In the previous fiscal year, Social Security payments equaled 5 percent of gross domestic product, a measure of US output of goods and services, according to the National Academy of Social Insurance reports

Even delaying the payments would have implications for many of the 40 million seniors who receive Social Security benefits.

“I have a lot of seniors who are collecting Social Security and are also getting the maximum allowance in SNAP [Supplemental Nutrition Assistance Program, or food stamps] benefits," says Kathy Laffer, a social worker who works with 100 such recipients every month through the local Department of Senior Services of Newton, Mass., a Boston suburb. "If they take a hit on both Social Security and food stamps, they will be left with some very difficult choices.”

Ms. Laffer worries that seniors may be unable to make their mortgage payments on time, which would mean penalties that would further crimp their fixed income. For renters, the stakes would be even higher. “Late payment could potentially expose somebody to being evicted,” she says.

The same problems are already affecting the majority of federal employees, who have been without pay since the government shutdown Oct. 1, and could soon hit veterans and military families. On Nov. 1, some $12 billion is due to go out to active and retired military personnel, as well as veterans.

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