Gloria Larkin is dissatisfied. She is concerned that if Congress cannot reach an agreement on the debt ceiling, it will harm small business owners like her and her clients.
“This issue of default with a subsequent recession would have a drastically negative impact on our business personally because it would cause our clients, our customers, to condense their spending,” Larkin explained. Her company, TargetGov, assists businesses in obtaining federal contracts across the country, ranging from construction to cybersecurity to office cleaning.
Larkin, like many small business owners across the country, is concerned about the government’s inability to pay its bills. Economists warn that if the United States defaults on its debt for the first time, it will cause financial and economic turmoil affecting nearly every aspect of the economy.
“We’re just coming back from COVID and other things that caused so many small businesses to fail,” Larkin explained. “Now that we’re hanging on by a thread, Congress wants us to put up with their antics in threatening something they don’t even need to threaten.” Oh my gosh, it’s just political theatrics that’s causing anxiety at the small business level, which is extremely damaging to our small business psyche.”
According to a new Goldman Sachs 10,000 Small Business Voices survey, 65% of small business owners believe they will suffer if Congress fails to raise the debt ceiling. Ninety percent of small business owners believe the government must avoid defaulting on the nation’s debt.
Treasury Secretary Janet Yellen warned congressional leaders in a letter on Monday that the United States might be unable to pay its bills as early as June 1 and urged lawmakers to raise or suspend the debt limit as soon as possible. This is not about future spending, but about repaying existing debt.
Even waiting until the last minute, according to Yellen, could harm business and consumer confidence, raise short-term borrowing costs for taxpayers, and harm the US credit rating.
“These survey results make it clear that a default would have very negative ramifications for small business owners,” said Joe Wall of Goldman Sachs 10,000 Small Business Voices. “Over the coming weeks, America’s small business owners will be looking to Washington for certainty and a sound resolution to the nation’s credit crunch.”
53% of small business owners polled said it is “absolutely essential” that the federal government does not default on its payments. Another 30% believe it is “very important.” 7% believe it is somewhat important, while 2% believe it is not important.
However, Congress appears to be no closer to reaching an agreement than it was in January when Yellen first urged action. House Republicans passed a bill with drastic spending cuts that will die in the Senate. The Biden Administration has stated that it would prefer for Congress to pass a clean debt limit bill, with spending addressed separately.
While 90% of small business owners believe it is critical for the government to avoid default, 81% believe it is critical for Congress to enact spending cuts in addition to raising the debt ceiling. This includes 40% who believe it is “absolutely essential” and 29% who believe it is “very important.”
President Biden has invited congressional leaders to a meeting at the White House on May 9 to discuss the debt limit.
However, if a deal is not reached by the so-called “X-date,” more than just small businesses will suffer. A debt default could affect when millions of Americans receive Social Security checks, military pay, veteran benefits, and other benefits. Analysts have warned that it would roil the financial markets and raise borrowing costs for businesses, governments, and ordinary Americans.
