With the federal government due to hit its debt ceiling on Jan. 19, Americans face the prospect of having certain services either cut back or shut down altogether.

                By                    Vance Cariaga

Government Shutdown 2023: US Will Hit Debt Ceiling By Thursday, Says Yellen — What Does That Mean for You?Money: Protect Your Financial Future With Gold and SilverSocial Security: Why Debt Ceiling Debate Puts Social Security on the Line — and How It Could Play Out

The reason is simple: When the government reaches the debt ceiling, it can no longer borrow money to pay its bills, meaning it would have to cut spending elsewhere. This could take many forms, including suspending certain pension payments, withholding or reducing the pay of federal workers and military personnel or delaying interest payments.

Failure to raise the debt ceiling could also lead to a partial government shutdown, which usually means temporary furloughs for certain government workers until a new spending bill is passed, The Wall Street Journal reported. During past shutdowns, the federal government has continued to make its regular payments to debtholders, retirees and others, so the main impact was felt by federal workers and contractors.

More From Your Money: Choose a high-interest saving, checking, CD, or investing account from our list of top banks to start saving today.

If lawmakers want to avoid another shutdown, they better get moving quickly. Back in September, Congress extended federal government funding through Dec. 3, but Treasury Secretary Janet Yellen recently said the U.S. will reach its debt ceiling on Dec. 15 instead, giving Congress a couple of extra weeks to act.

Student Loans: DOJ Says Overruling Biden’s Forgiveness Could Lead to Lawsuits Over ‘Virtually All Federal Action’Find: 2023’s Housing Correction Could Be the Largest Since Post-WWII

If Congress doesn’t raise the debt ceiling by then and the government is forced to shut down, the Treasury Department might have to reduce its payments by more than 40%, according to estimates from Goldman Sachs.

See: Government Shutdown 2021 — Will SNAP Benefits for December Be Paid Without Debt Ceiling Extension?Find: Stimulus Update — Emergency Rental Assistance Program Surpasses 2.5 Million Payments

Meanwhile, the Centers for Disease Control and Prevention, Food and Drug Administration and National Institutes of Health would be forced to furlough 43% of their employees, which could cause significant delays and reduction of services in the midst of a pandemic.

Such a scenario has caught the attention of Wall Street firms and former Treasury officials, who warn that a government default would be disastrous for financial markets and the U.S. economy.

  • 5 Things Most Americans Don’t Know About Social Security
  • 21 Items That Are Always Cheaper at Costco
  • Save on Holiday Decor With This Instant Shopping Hack
  • What To Consider When Choosing a Mortgage Lender