What Debt Debate Means For Your Bank Account

MINNEAPOLIS (WCCO) — Lawmakers in Washington D.C. are at an impasse over raising the nation’s debt ceiling. President Obama met with top Democrats in a closed door meeting at the White House on Sunday evening. Lawmakers have until Aug. 2 to agree on a plan.

Republican Speaker John Boehner has proposed a two-part plan that would cut spending and raise the debt limit by $1 trillion immediately, enough to last until the end of the year.

But the president said he will veto any plan that doesn’t extend the debt limit through the next election.

Now, both parties are trying to reassure the world financial markets the U.S. government will avoid defaulting on its debts.

“Positions are absolutely hardening right now so this is the point of maximum nervousness,” said Marketplace Money economic editor Chris Farrell.

Many Americans are taking notice of the hard party lines drawn in the race to loosen the bipartisan debt limit dead lock.

Both Republican and Democratic leaders say the plan is to avoid default but getting there has been more difficult than expected.

“I think there is a very clear message that is coming out of Washington and the message coming out is we are not going to default. The question is how do we avoid default and how messy is that process and how much does it shake the confidence of investors,” Farrell said.

Farrell also said if a deal is not reached, the average person would be impacted.

“What is a reasonable forecast is interest rates will go higher, the economy will be weaker and the unemployment rate will go up,” he said.

Farrell said this is bad news for a country already dealing with a fragile economy. Mortgage rates could climb, making homes harder to sell. People looking for work could face an even tougher job market.

Some say if the debt ceiling is not raised, more than $10 billion in social security and veteran benefits would be in jeopardy.

“Its breaking a trust and it’s breaking a trust with pensioners, its breaking a trust with retirees, its breaking a trust with so many people just to threaten this very situation,” said Farrell.

He believes the political system will rise to the occasion and do what is needed to ensure no damage is done to the standing and economy of the United States.

Treasury Secretary Timothy Geithner said a plan that doesn’t reach into 2012 would shake the markets.

Right now, the Asian financial markets are down, the Nikkei fell nearly 60 points since opening Monday morning. U.S. stock futures are also predicting losses when they open in the morning.

The only thing Farrell said would not be affected if the debt ceiling is not raised are credit card interest rates, because they are already through the roof.

More from Reg Chapman
  • Rico Suave

    Tim Geithner is disqualified from preaching to us about money. He’s a tax cheat. We’re talking tens of thousands of dollars. He cheated on more taxes in one year than most of us make. Of course he’s exactly who I’d expect for Obama’s choice of Treasury Secretary. SUPREME IRONY. How dense do you have to be to miss it?

    As far as the debt ceiling is concerned, it does not have to be raised for us to keep our credit rating as long as Obama and Geithner in the Treasury pay on the debt service first, over our massive unfunded entitlements. There’s enough coming in to pay Social Security and the ones we all agree are the most important programs and pay our creditors. There are many programs that could be shut down temporarily (or for good) while we wrestle Obama’s reckless new spending and make a plan to fix this problem of massive debt. This is like an irresponsible credit card user trying to convince his creditors that his problem is not his spending, but their refusing to raise his credit limit.

    Also, those on the left never talk about what will eventually happen to our AAA rating if we just keep spending. Look at Greece, Portugal, and Spain. We should be more worried about what will happen if we don’t deal with our debt.

  • MIke

    Here are some facts for your thick skull Rico;
    1.) Ronald Reagan tripled the National debt.
    2.) George W Bush doubled the National debt.
    3.) Ronald Reagan raised the debt limit 18 times.
    4.) Bush raised debt limit 5 times.
    5.) If the USA defaults it will be blamed on the GOP

    • Geithner Sucks

      Nothing about Geithner in your rant? I guess the fact he doesn’t pay his taxes and he’s one of the extremely wealthy doesn’t matter to you? Obviously no common sense was lost on you!! Hatred is a terrible thing?

    • Rico Suave

      Reagan also doubled the GDP. He did deficit spending by lowering the tax burden and fueling the biggest economic recovery in our history. The debt in the Reagan years was miniscule by comparison. Obama tripled Bush’s budget deficit in less than three short years, and added 4 trillion to our national debt. Oh yeah, and by the way, who said this????
      “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”

      That’s right Barrack Obama said exactly those words when he and all the rest of the democrats voted NOT to raise the debt limit for Bush. A few facts for your thick skull, Mike. Spin your way out of that.

      • snowman

        Who cares about your children and grandchildren?

    • dan

      Bush and Reagan were both in office 8 years. Why dont you tell us how much Obama spent in his first 2 years? Cant imagine what his grand total will be if he sees 8 years in office.

      • O-done-a

        Said to be 4 trillion

        • dan

          Scary, 2 Trillion per year for a grand total of 16 Trillion over 8 years! Wow

  • Charybdis

    and how many times were the dfls in majority during those eras. how much pork barrel had to be added to every bill because the dfl wouldnt vote for it unless that happened. how much is entitlements costing. blamed on the gop? only by the obtuse pieces of flotsam, mike. i mean michael `~

    • pathetic morons run this country and then we got you

      with politics as fricken dysfunctional as you folks it’s no G,,D…n wonder nothing ever gets done in DC that benfits the country. It always bullchit to look good and get re-elected.
      Frankly – this country no longer has a chance to remain the global leader in a single thing except for dysfunction and turmoil. The Greatest Generation say it coming as soon as you chumps were hatched

      • Jay

        Ill second that!!

      • middle of the road


  • Worker bee

    Are the Conservatives busy pulling their money out of the stock market, bonds, or other financial investments? It would be interesting to see an article on THAT! It’s always about where the money is going. Look at that and you will see the future of the U.S.

    • Geithner Sucks

      Who could blame them if they were? We have a crazy spender in control and it’s THEIR money, not OURS to steal?

  • Sam

    It would be MORE irresponsible to raise the debt limit and keep spending than to default.

    Congress spent like fools and idiots. Now they have to pay some bills. They will be FORCED to cut things. That is a good thing. How about starting by eliminating the NEA and HUD?

    • Rico Suave

      Amen my friend. But you left out the EPA and the EEOC. Two utterly worthless sucking vortexes of federal dollars. Or how about the DEA? We’ve been paying them to sell guns to the Mexican drug cartels so they can shoot our border agents and our citizens. There are too many choices of things we could toss and save billions. Maybe we could sell Obamas limo to one of the drug lords instead of assault rifles.

      • frozenrunner

        It is amazing how little knowledge you have.. You post how great Reagan was that he doubled the GDP while tripling the debt. Perhaps you want to remember history as to why the agencies were created.. Then again you might not be able to read that well and can only regurgitate what you hear on talk radio.

        • Rico Suave

          Figures lie and liars figure. Reagan may have tripled the debt but as a percentage of GDP he cut it in half. I’ll explain this to much the way I would to a child or any liberal: If a person has a half million in the bank but owes creditors 20 thousand, is he not far better off to owe 60 thousand and have a million? That’s what Reagan did. BTW were you in a coma during the Carter years, when the misery index was invented?

          • frozenrunner

            Rico, again you show your lack of knowledge.
            First of all, did I say anything about Carter? No . Can’t make an argument, throw in something else to confound.
            As a percentage of the gross national product when Reagan took over it was at 30%, when he left it was over 50%
            http://www.usgovernmentspending.com/federal_debt_chart.html If you can’t figure out from simple math that Regan grew the debt faster than the economy that is your problem. Again, go do research rather than spout of whatever you heard on the radio. Are you going to continue to make up facts?

          • jan

            If you have one million in treasury bonds and they default, you don’t get your interest check. The bond price would drop dramatically and you’d probably get twenty cents on the dollar if you sold the bond. Try that when you’re 80 years old.

            • O-done-a

              Jese Jan, good for you. That’s amazing! I hope you are a young, lively, healty 80 and having some fun!

              • jan

                Yeah, I’m healthy, lively and try to be young at heart although I look kind of old

  • Ted

    The economy, unemployment, housing, … there is so much that is hindered as we have this threat hanging over our head. Those who think that this does not matter to them are up against those whom it matters in a huge way. Forget the 2012 election and all the key words (“reckless spending”) and get the debt ceiling fixed so that we don’t need to do this again in 6 months. All those who are in a position to know what will happen if we don’t, what is happening now because we are not taking action, are telling us we need to get the debt ceiling fixed. Arm chair economist such as Backmann are going against those who should know and do know for a political advantage.

  • O-done-a

    It’s pretty simple. Pass the increase in the debt ceiling so we can pay our obligations in full and on time. Then have lawmakers do their damn jobs: Talk, negotiate, bargain, plead, threaten, bluster, pontificate, legislate and cast votes until they’ve figured out in a transparent and democratic fashion how to stabilize our public debt at a sustainable ratio, setting spending, taxing and borrowing at levels that we can live with. And then face the voters on Election Day. Repeat as needed.

    • dan

      Thats like giving a 2 year old his cake then ask him to finish his cold squash. It wont work unless they are under pressure. Close the doors and get this deal done!

      • O-done-a

        In practice, a vote not to raise the debt ceiling functions as a sort of fiscal confessional that enables sinners to soothe their guilty consciences for having just voted for deficit spending. For instance, almost all House Republicans voted earlier this year for a 2011 budget that locks in a deficit of about $1.4 trillion. And they voted for a budget resolution that would create almost $7 trillion of debt over the next 10 years. Voting against raising the debt ceiling doesn’t change those votes, but it does make those lawmakers feel better about themselves.

        • dan

          Who has proposed to not to raise the debt ceiling? GOP is simply asking to cut spending now and not over 10 years while still raising the debt ceiling.

          • O-done-a

            Tea Party. Problem with cutting spending RIGHT NOW…..Balancing the budget immediately would be a catastrophe. Even large budget cuts would make the very weak recovery stall. It’s simple arithmetic: What the government spends becomes someone’s income, which they in turn can spend. Cutting government spending (or raising taxes) means cutting disposable incomes and that means cutting economic growth. That’s why we don’t want any of this budget balancing to take effect for at least a couple years. Once growth is stronger, the government can reduce spending and raise taxes without hurting the economy.

            And you had a good question up top. I had to look into it and found this…though speculative, probably true to now
            from Jan. 20, 2001, to Jan. 20, 2009, the debt held by the public grew $3 trillion under Mr. Bush—to $6.3 trillion from $3.3 trillion at a time when the national economy grew as well.
            from the day Mr. Obama took office last year to the end of the current fiscal year, according to the Office of Management and Budget, the debt held by the public will grow by $3.3 trillion. In 20 months, Mr. Obama will add as much debt as Mr. Bush ran up in eight years.
            Mr. Obama’s spending plan approved by Congress last February calls for doubling the national debt in five years and nearly tripling it in 10.
            Mr. Bush’s deficits ran an average of 3.2% of GDP, slightly above the post World War II average of 2.7%. Mr. Obama’s plan calls for deficits that will average 4.2% over the next decade.

            • dan

              Simple Arithmetic is great but how about more simple Idea is to cut out the middle man…..The Govt! Instead of this cycle of Govt spending to create someone elses income, let the people spend to create others income. The inefficiencies of the Govt trying to create jobs is killing our economy.

              • O-done-a

                Ron Paul’s our guy–yours and mine I mean–don’t want to make people crazy here.

  • yeppers

    Hopefully it means my savings will start earning more interest.

    • O-done-a

      I hear ya. But that would mean certain failure has occurred.

  • Tan pup

    It amazes me all the finger pointing on post. Yet I will bet not one person actually has their facts straight. We the people are to blame for our current position because we all have looked the other way and have been confused and mislead by the biggest circus performers ever – our sociopathic legislators. We have chosen to discount common sense, embraced unrealistic beauty vs. experience, preferred fear, vengeance and bullying to compromise, and allowed war to replace education. Don’t feel bad, this has the way it has been since the existence of recorded history. We just have better technology to spread the raw sewage and equally unfortunate, we all continue to stay that same course and never get off that beaten path.

  • Matt

    Republicans want to cut spending and cut taxes, this will not get the debt down. What we need to do is cut spending, slowly over years, and remove tax breaks for so called job creators that do not create jobs, and raise taxes so we can pay back the debt and money borrowed from social security.

    • Worker bee

      You are right on, Matt.

  • kevin

    Here’s simple math.
    1 How much did you take in, in taxes.
    2. You can’t spend anymore.

    • The Architect

      Not only is it simple math, it’s simpleton thinking when it comes to economics. I suggest Macro-Econ 101 for you.

  • O-done-a

    a cut and paste
    For those who think default is no big deal: it would make the debt problem much worse. Interest rates would permanently rise, the financial system would seize up temporarily and a recession would certainly result from slashing government spending by 10% of gross domestic product for more than a few weeks. One definition of a depression is a 10% drop in GDP.
    For those that think default would mean the end of the world: it would be pretty awful, but the sun would come up the next day. Countries have defaulted before, and lost their triple-A rating, and they’ve managed to recover and even return to the markets for loans. There are things worse than temporarily defaulting on our debts, such as permanently reneging on social security and bond interest that people, regardless of opinion, paid into. These things would not happen since we would just print more money to poney up.
    For those like me: The U.S. government can currently borrow at very low interest rates. If government borrowing were really crowding out private investment, you’d see it in the bond yields. We can afford to repay our debts, easily. We have time to fix this.


    Architect, here a simple repy to you. Kis my a$$. YOUR ONLY REPLIES ARE THE SAME AS CITIZEN’S. IF SOMEONE DOES NOT AGREE WITH YOU THERE AUTOMATICALLY WRONG. Being an architect you should be able to design something other than liberal BS.

    • Sean

      Kevin. Considering you stated position , Bill Clinton must be the greatest president in the last 40 years as he left W a balanced budget,and a surplus of revenue. Reagan and the Bushes raised the debt considerably. They must be awful. Stating your opinion as simplistic was not calling you wrong, just simple.

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