SCHUMER CALLS ON DEMOCRATS AND REPUBLICANS TO COME TOGETHER ON DEBT CEILING AGREEMENT - WITHOUT ACTION, NEW YORK'S MIDDLE- CLASS FAMILIES WOULD PAY MORE FOR GAS & FOOD, FACE HIGHER MONTHLY MORTGAGE PAYMENTS AND CREDIT CARD BILLS
Schumer Pushes For Swift Bipartisan Agreement To Prevent Massive Increases In The Price Of Basic Needs For NYers - Failure To Reach Agreement Could Result In Higher Interest Rates On Credit Cards, Huge Losses In Retirement Savings
New County-By-County Report Breaks Down The Additional Millions NY Families Would Spend On Their Mortgage, Credit Card Bills, Gas And Groceries If The U.S. Defaults
Schumer: We Must Reach A Balanced Agreement Quickly To Avoid Another Recession
Yesterday, U.S. Senator Charles E. Schumer called for a bipartisan agreement on the debt ceiling to avoid dramatically raising the cost of living on families throughout Upstate New York. Schumer outlined a county-by-county report on the consequences of failing to reach a balanced agreement and avoid defaulting. Due to the specter of an increase in interest rates and a weakened dollar, New York families could pay millions more on their mortgage bills, credit card payments, and for basic goods like groceries and gas. If an agreement to avoid defaulting on the debt is not reached in time, banks and financial institutions estimate that mortgage payments would increase by over $1,000 per family each year. They also predict that credit card interest would jump by $250 per family, and the cost of utilities, food and gas would increase by a combined $600 each year. In addition to massive increases in the cost of living, Schumer discussed the nearly $200 million New York receives in federal veterans' benefits, retirement benefits, and student loans that would dry up if an agreement is not reached.
"We simply cannot put the financial futures of millions of middle-class New Yorkers at risk," said Schumer. "Democrats and Republicans must come together now and reach a balanced agreement to avoid sending our economy into another recession. Times are tough enough already, the absolute last thing we should be doing is raising mortgage rates, credit card bills, and the price of everyday goods like gas and groceries by failing to come together and forging a common-sense compromise."
Failing to reach an agreement on the debt ceiling and sending the country into default on August 2nd would have catastrophic consequences on middle-class families throughout New York. According to financial analysts from J.P. Morgan, even a brief period of default could send interest rates skyrocketing by 75 or even 100 basis points, which would massively increase the cost of borrowing for families. Between just credit cards and mortgage payments alone, families across the country would be hit with an additional $10 billion in borrowing costs each year.
Currently the average monthly mortgage payment in the U.S. is approximately $1,022. If the U.S. were to default, an analysis by J.P. Morgan predicts that the basis point increase in interest rates would result in that average increasing by approximately $85 per month, or about $1,020 per year - essentially an entire month's mortgage payment tacked onto each year. According to a Third Way report, defaulting would add over $19,000 to the lifetime cost of a 30-year fixed rate mortgage on a median home loan of $172,000 for an existing home.
In addition to higher mortgage payments, defaulting on our debts would cause credit card interest to jump by about $250 per family. Just under half of all Americans have credit card debt, with a median balance of $3,300. The basis points increase in rates would cause interest payments to increase for every family with credit card debt, totaling about $5 billion nationwide. Defaulting would also weaken the dollar, analysts suggest between 5 and 10%, driving up the price that families would have to pay for everyday expenses like utilities, food and gas. A 5% decrease in the value of the dollar would cause American families to pay an additional $182 per year on utilities, $318 more per year on food, and about $99 more for gas each year.
New Yorkers' retirement accounts could also take a big hit in the event of a default. Financial services firm Janney Montgomery Scott estimates that the default would cause the S&P Index to lose 6.3% of its value in three months, while J.P. Morgan predicts that the loss would be closer to 9%. If the loss is just 6.3%, the 401K account of a typical investor in their fifties would lose approximately $8,816. Family 401K savings accounts could lose all of their gains made in 2009 and 2010, putting them even further behind their late 2007 levels.
If the United States defaults on its loan obligations, the cost of refinancing or securing a new mortgage, paying off credit card bills, and the cost of basic goods like gasoline, groceries, and utilities would all increase significantly for New Yorkers. Here is how the numbers break down across the state:
· In the Capital Region, there are 199,905 mortgages, and families could pay $24,764,193 more in credit card interest and $174,140,400 more for basic goods.
· In Western New York, there are 235,959 mortgages, and families could pay $31,000,687 more in credit card interest and $204,889,800 more for basic goods.
· In the Rochester-Finger Lakes Region, there are 222,388 mortgages, and families could pay $26,760,377more in credit card interest and $183,744,600 more for basic goods.
· In the Southern Tier, there are 120,908 mortgages, and families could pay $17,152,519 more in credit card interest and $113,445,600 more for basic goods.
· In Central New York, there are 178,691 mortgages, and families could pay $23,403,534 more in credit card interest and $157,318,200 more for basic goods.
· In the Hudson Valley, there are 376,907 mortgages, and families could pay $49,678,370 more in credit card interest and $338,902,800 more for basic goods.
· In the North Country, there are 82,305 mortgages, and families could pay $12,233,821more in credit card interest and $80,448,600 more for basic goods.
· On Long Island, there are 521,453 mortgages, and families could pay $62,563,955 more in credit card interest and $426,852,00 more for basic goods.
· In New York City, there are 657,823 mortgages, and families could pay $164,414,177 more in credit card interest and $1,110,132,600 more for basic goods.
In addition to the cost of living impact on middle-class New Yorkers, failing to reach a debt ceiling agreement could stop key federal benefits from flowing to seniors, veterans, and students across the state. Attached to this release is a full county-by-county breakdown of the potential loss in benefits, totaling nearly $200 million. If the debt ceiling is not raised, the revenue coming into the federal government will not be enough to cover its obligations to individuals throughout the state. Grants to counties and local governments, as well as the federal purchases of goods and services produced by New Yorkers could stop in the event of default. Social Security, Medicare, Medicaid, veterans' benefits, military payments, student loan payments, and other government services could all be at risk. In New York:
· There are 8,624 total troops deployed by home residency, both Active Duty and Reservists
· There are 950,417 veterans
· There are 2,915,477 Medicare beneficiaries
· There are 3,280,575 Social Security beneficiaries
"Defaulting on our debts could be devastating for Upstate New York families," continued Schumer. "It's time for the parties to come together and reach an agreement that will keep retirement accounts intact, federal benefits flowing, and the cost of living for middle class families from shooting through the roof."