Debt ceiling debate includes real consequences for average Americans
The debt cieling's consequences for average Americans
The current debt ceiling is $28.4 trillion dollars, and the government has spent it all. There will be real consequences for average Americans until leaders agree to spend more.
U.S. Treasury Secretary Janet Yellen is warning of 'catastrophe' and recession, if lawmakers don't raise the nation's debt-ceiling by October 18.
It is a debate over trillions of dollars.
The current debt ceiling is $28.4 trillion dollars, and the government has spent it all. There will be real consequences until leaders agree to spend more.
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"The sheer amount of debt outstanding, that is going to be potentially affected by this, is much different than in previous cases," says Houston economist Sam Rines.
He notes the government has faced this kind of financial line-in-the-sand dozens of times, as political posturing takes center stage. The difference, this time, is approximately a trillion dollars in debt must be serviced in the coming weeks.
A default could shake global economic confidence, that relies on a stable dollar.
At home, the effect could hit family finances in a hurry.
In the short term, interest rates for credit cards and mortgages could rise, while money market funds and investments would suffer. Additionally, benefit programs like social security and government paychecks would be halted.
"You will have spiraling effects into the Thanksgiving and Christmas holiday that could, potentially, be very bad for consumer sentiment, very bad for consumer spending," warns Rines, "But, generally, those obligations will be paid. They'll just be paid late."
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That last part is an important distinction. While the national debt clock keeps getting deeper and deeper into the red, the ever growing number is proof that the government will, ultimately, find a way to keep spending.
"It's almost always political jockeying, and it almost always comes down to the last minute," says Rines, "It's going to come down to, at least, the last minute this time around."
While a last minute deal is possible, Sam Rines thinks there's a good chance it does not happen, in time. So, if interest rates rise, he thinks they'll come back down once the dust settles. However, people depending on a government paycheck, or benefits, may have to hold tight until the deal is done.