What can the default on the national debt mean for Michigan?
It depends, according to the Detroit News.
If the default is short, it said last night, that could be “a loss of 1 million jobs and up to a 5% unemployment rate, estimated Moody’s Analytics in a March report. A longer default would create a much worse recession, which Moody’s estimated at around 7 million lost jobs and a more than 8% unemployment rate.”
The loss of jobs at those levels mean fewer people making money to pay taxes for services such as schools and police.
The default could also means the interruption of social-net programs like Supplemental Nutrition Assistance Program (SNAP), Social Security payments, and funding for Medicare and Medicaid. It could also mean that federal employees, such those serving in the military, won’t get paid.
In the terms of the number of people affected, that means, the Detroit News said, “there were 1.3 million people in Michigan on food stamps in June 2021, according to the latest data available from the St. Louis Federal Reserve. In December 2021, nearly 257,000 Michigan residents received Social Security benefits. More than 2.9 million Michiganians were enrolled in Medicaid as of October 2022 and more than 2.1 million used Medicare as of 2021, according to the Kaiser Family Foundation.
As far as the military and other federal employees, “there are more than 4,000 active-duty service members and nearly 21,000 National Guard and reserve members in Michigan, according to the Department of Defense. There are nearly 30,000 more Michiganians who make up those members’ spouses and children. As of March this year, 55,000 Michigan residents were federal employees.”
With that said, economic experts predict that the state won’t experience the same level of job loss like it did during the Great Recession of 2008, partly because the number of jobs tied to the state’s mono-industry, auto-making, have already been wiped out. There are fewer people in those jobs, so any loss from those jobs will be lessened, relative to what happened in 2008.
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