Senior Writer and Editor, Strategic Communications, U.S. Chamber of Commerce
May 22, 2023
The U.S. federal government is nearing the limit on the amount of debt it is legally allowed to accrue. Congress sets this debt limit and has the power to raise it to meet the country’s financial obligations. If Congress doesn’t increase the limit before funds run out, the government would be unable to pay its bills on time, resulting in a first-ever default, which would be catastrophic for the U.S. economy.
Here's everything you need to know as a small business owner about the debt limit standoff and its possible repercussions for your business.
What small businesses think about the debt limit standoff
Small businesses are deeply concerned about the possibility of the U.S. defaulting and its potential repercussions. The vast majority of small businesses want the U.S. to avoid a default:
- According to the Goldman Sachs 10,000 Small Business Voices survey, 90% of small business owners want the government to avoid defaulting on the nation’s debt.
- In the same survey, 65% of small businesses say they would be negatively impacted if Congress does not raise the debt ceiling.
- 81% of small business owners want Congress to enact spending cuts in conjunction with raising the debt ceiling according to the survey.
In other words, most small business owners want their elected representatives to come to a bipartisan compromise to avoid default.
Tell Congress: Resolve the Debt Limit Impasse
Small businesses would be devastated by a default on the debt limit. Join us in urging Congress to avoid a catastrophic default.
How small businesses could be impacted by a default
If there is no resolution and the U.S. goes in default, the repercussions could be devastating for small businesses. Here’s just a sampling of highly likely outcomes:
- Recession. Many analysts believe an already fragile economy could spiral into a long recession if there’s a default. It would also likely cause extreme turmoil in both stock and bond markets.
- The credit crunch could worsen. According to the MetLife & U.S. Chamber of Commerce Small Business Index, concerns over rising interest rates rose 9 points this year. Rates might go higher and credit could become even more scarce, preventing small businesses from accessing the credit they need to grow.
- Much higher inflation (and a much weaker dollar). The dollar is the globally-dominant reserve currency and seen as a universal store of value. After a default that would no longer be the case. The role of the dollar would be weakened, perhaps permanently. This would mean less spending power for small businesses and higher inflation as the dollar weakens relative to global goods.
What small businesses can do now to prepare
There are a few things you can do to head off a default while preparing for its possible consequences, including:
- Emailing your Congressional representatives and telling them about how your small business in their home district would be impacted and how vitally important it is to reach an agreement.
- Making sure your business is prepared to navigate the changing economic landscape. A recent U.S. Chamber blog post by a real small business owner discusses strategies any small business can take to weather tough economic times.
To learn more:
Read the U.S. Chamber’s take on “The Dire Consequences of a U.S. Debt Default.”
About the authors
Thaddeus is a senior writer and editor with the U.S. Chamber of Commerce's strategic communications team.