What a government default would mean for you

Print
Email
|

wwltv.com

Posted on July 26, 2011 at 10:19 PM

Updated Tuesday, Jul 26 at 11:10 PM

Tania Dall / Eyewitness News

NEW ORLEANS -- While the debt crisis showdown in Washington, D.C. rallies on, many Americans are asking what would a government default mean to me?

Economic experts say anything could happen, including a spike in interest rates to job cuts to a shutdown of essential government programs.

"This is something that's unthinkable," said University of New Orleans professor Walter Lane. "Washington is playing a giant game of chicken. Unless somebody flinches, there could be a huge crash."

While politicians duke it out on Capitol Hill trying to solve the money crunch, Lane said, simply put, a government default would disrupt your ability to borrow money.

"Interest rates effect everyone: student loans, car loans, mortgage loans all those things -- all ratchet up if the base rate that they're all based on were to change," Lane said.

Besides jacking up interest rates on car loans, credit cards, school loans and even your home, the ripple effect of a government default would also be felt across the state of Louisiana.

"We depend on the federal government to support our Medicaid program," said Louisiana Treasurer John Kennedy.

Many other local programs that rely on federal and state dollars -- like government jobs, social security, food stamps, blight reduction funding, coastal restoration and dredging projects -- could also potentially be hit hard.

"What it would mean is some bills would be paid and others wouldn't. Now which ones would be paid and which ones wouldn't, that's up to President Obama, and he hasn't said yet," Kennedy said.

As the Aug. 2 deadline draws near and the debt crisis looms, Kennedy is keeping his fingers crossed for a long-term resolution.

"I want them to do something that will contribute to long-term prosperity of our country. I don't like that for all of this debt our generation has piled up, my son has got to pay it back and his children have to pay it back," Kennedy said.

Having the government default on its debt is a worst-case scenario many across the country and here at home would rather not see happen.

"If they pull the trigger, there are dire consequences," Lane said.

 

Print
Email
|