Expert: Americans Shouldn’t Panic Over Debt Ceiling — Yet

MINNEAPOLIS (WCCO) — By now, most Americans have probably heard the worst-case scenarios with hitting the debt ceiling: a dipping dollar, loan difficulties, a jump in interest rates. So, how likely is a worst-case scenario?

In the President Barack Obama’s address to the nation on Friday, he reminded the country of the importance in reaching a deal.

“Keep in mind, if we don’t do that, if we don’t come to an agreement, we could lose our country’s AAA credit rating,” Obama said.

We talked to a St. Paul economist who says he’s confident a deal will be struck to avert default — and soon.

David Vang, Professor of Finance at St. Thomas, says there is no need to start panicking just yet.

“Even if the United States gets downgraded a little bit, we still will be — maybe for another generation — the best place to park your money, if you’re looking for true safety,” Vang said.

Vang says to think of the debt ceiling crisis in the same way you think of your personal finances. While we try to pay off bills and balance our budget, he says instead, Washington’s charged bills to the national credit card. While he says big brother is watching, he thinks there’s still time to recuperate some of America’s losses.

“If this particular deal doesn’t go as smoothly as we want it to, but we recover and do something else real soon, then I don’t think rating agencies are going to downgrade us,” Vang said.

In fact, he says the rating agencies are sympathetic to the fact it’s tough to fix a problem that took decades to develop in just one year.

“In the long-term, are we going to have a situation where our government expenditures will be growing at a slower rate than the economy grows? If we have that, we’re going to be financially sound,” said Vang.

In the meantime, Vang predicts a deal in a week’s time.

“Our politicians are not puppets or caricatures, they are human beings too,” said Vang. “There’s only so much pressure anyone can withstand before you want this painful experience to go away.”

WCCO-TV also spoke with investment officers in town who say that although the stock market reflects some concern, they haven’t been fielding phone calls from people worried about their investments, and think most people expect a resolution soon.

  • Grammar Corrector

    Um, shouldn’t that me EXPERT not EXPECT??? Once again, I need a job, you need an editor!

    • Corrector Corrector

      Um, shouldn’t that be BE not ME??? Hello pot, meet kettle!

    • KeepItReal

      Forget grammar…how about talking to someone who actually knows something. An finance prof from UST? Really? He is going to reassure anyone? Economics is not science. The corrupt stock market is what drives our economy. They win when there is panic, because there is volatility, then their trading programs exploit by driving share prices and buying and selling to make money. The real solution was to put together a budget package 3 years ago that would drive down debt, not once again raise it. The likelihood of the US’ credit rating dropping, by increasing the debt ceiling and put together a sham of a budget that will not reduce debt sooner, is just as likely to cause a credit rating drop. We have to stupid parties that are play chicken with “the people” future. Whatever deal is passed, will only delay and intensify the pain. We must fix healthcare by tying premiums to life style, reducing compensation for providers and doctors, reset public employee compensation and pension, reduce military medaling around the world, privatize government services, change tax code to reward corp responsibility, cut out tax loop holes, cut waste, fraud and spending in gov programs, We must dramatically cut spending and also raise taxes now!

      • What!?!

        I only have one issue with one thing that you said.. economics is not a science… That is some what true.. Is it a true science.. some can argue that but it does use and imply some scientific reasoning. Its reasoning is based on predictions which are based on trends.. They are formulas that can be applied to these trends that will give us some view of a future out comes.. other than that I agree with the rest of what you have stated

  • skaloc

    We would not need to raise taxes if more people were working — Instead of bailouts and OBAMACARE, how about jobs ?

    • Mke

      When your beloved Bush left office we were losing 800k jobs a month.
      Under President Obama’s leadership we have started gaining jobs.
      Maybe you should get out of your mothers basement and look for a job or go to school and learn a trade. I have not had any problem finding a job as a machinist and have been working 30 hours overtime every two weeks since last August.

      • Mark from

        @MIke What color is the sky in your world?

        • jimmy

          What color is the sky in your moms basement?

      • Mark

        MKE, do a little more research and tell me how many jobs / month we were losing in 2006. In 07 Pelosi and Reid took over congress. This mess we’re in is squarly on the shoulders of a liberal house and senate for 4 years, liberal house, senate and white house for 2, and a liberal senate and white house today. Repubs have been in the minority for a long time!
        Did you have equity in your home in 2006? I did. Did you have money in your saving account in 2006? I did. Did your friends have jobs in 2006? Mine did. etc. etc. This whole mess ramped up in 07 and has been accelerating toward the cliff for 4 & 1/2 years. If not for the “tea baggers” the liberals would have driven us off the cliff this summer. BTW, Didn’t your beloved Obama know we were about to hit this debt ceiling last year? He was acting like a teenager with a new credit card, having to much fun vacationing to notice the card was about to max out. And by not doing anything about it last year, when he had full liberal control of everything, he can sit back and do what he does best. Blame republicans.

        • Citizen

          Take your own advice, Mark, and do some research and perhaps read a book. “Predator State” comes to mind. Whenever both parties obsess about the debt and use it as a political wedge, the economy suffers. And both parties are guilty of this. Historically, when debt has expanded and other economic factors are in place, such as low interest rates and plenty of government regulation of the financial sector, things go well. You need to understand that both parties in government since the 1960’s have not committed to full employment under the guise that full employment is inflationary. Yet, inflation historically ended in 1984 and has been pretty dead ever since. Greenspan tanked the economy with misguided federal researve policies off and on during the presidencies he served. Bernanke is just an idiot. The stock market historically does better under Democrats. Just a few facts for you. When you say the whole mess ramped up in 07–guess who was President? The facts are these messes don’t happen overnight and certainly will not get solved the same way. Conservative fiscal policies and obsession with the probably unconstitutional debt limit, are not going to help with the jobs issue or economic recovery. Tell your friends who need jobs not to hold their breath and certainly not to vote conservative or tea party.

          • Citizen

            Sorry. Forgot one tiny issue about inflation. It really only rears its ugly head when oil prices increase. Bush II’s wars took the price of a barrel of oil from $25 when he took office to over $100. And it hasn’t come down much since thanks to speculation by the oil companies and financial sector.

            • Mark

              Citizen, you have any idea what a lame duck president is? Bush was in the white house with his hands tied for his last two years.
              The stock market is doing well right now, for all your rich liberal friends. New York is a Blue State after all. But how does that help put Americans back to work? The liberal bail outs helped pump billions into Wall Street but it sure hasn’t helped Main Street. Croneyism,Liberal croneyism
              That $100 oil happend with Pelosi and Reid running the show for 4 years. Liberals want it to go higher. Have you not been listening to our president? He wants all energy costs to go higher. He wants $6 pump gas. Or higher. He wants electric rates to go higher. Speech after speech. But you still blame Bush for this?

              • Citizen

                You know, Mark, I actually blame both parties–and politics as usual. And the voters who get suckered by the politicians every 4 years into voting against their best interests. Honestly, get a grip! Both liberals and conservatives have money in the stock market–but HISTORICALLY the market does better under Democratic administrations. And in case you missed it, the wars have driven up the price of oil–not Democrats in Congress. Of course, politicians all blathered about ending the war. I don’t listen to President Obama much because he is so politically naive as to make me want to throw up. So, I’m sure he thinks a solution is to have high energy prices so we can move to “green” solutions. Barf! And yes, I blame Bush for most of this. He rigged the financial regulations and tax code to send your tax dollars to his wealthy friends. However, after this latest dog and pony show about the debt ceiling (unconstitutional), I will wait and see if the voters who are ultimately responsible for this debacle and the congressional weasels, will grow stones and DO SOMETHING! Vote them out, issue recall petititions, march on Washington. Anything. Take back the country and get involved.

                • Phil

                  Citizen are you sure you wouldn’t be happier in Cuba?

            • Citizen

              Phil. Are you sure you wouldn’t be happier on another planet? Or how about never-never land? Sounds like fantasies are your thing….

  • Mr. Mustache

    Prez Odumba promised change. That’s just what all the bleeding heart liberals, union workers that thought they were going to get more benefits, and all the welfare cheats that expect everything to be free and not one ounce of work to get them got. The Democratic party should be outlawed. Bring on the independents.
    Along with being the worst president ever, MN now has the worst leader, Governor Goofy.

    • Your Mother

      Mr Mustache, (I bet your a hit at those Tea Bagging rally’s)
      You are an idiot.

  • See BS

    I think Baby Boomers spent the last 3 decades buying the world a home, and Furnishing it with love, hippies used their medicare money to grow apple trees and honey bees, and snow white turtle doves.

    Now they want to buy a world a coke with younger generations social security and medicare money

    They call it a “Debt Ceiling” crisis, but it’s just a big ponzi scam, and Gen X and Gen Y will end up not getting very much, so Baby Boomers can hord it all to themselves for Namby Pamby stuff. .

    • MIke

      See BS
      What the hell have you been drinking tonight or did you get up early for a bowl of Carnation Instant Bee-itch?

      • See BS

        Jon Bon Jovi hardly pays any property taxes, because he is wealthy enough to install solar panels, and has a Bee farm on his property. Meanwhile, his “middle class” neighbors pay up the Kazoo in property taxes.

    • Another Mike

      Wow, very creative writing. We all need to scale back our expectations just a little. Do we really need all of the “stuff” we have?

      • Citizen

        @Another Mike. I don’t know about you, but I don’t need any more plastic trinkets from China. I’m starting to feel like the Natives who got bought off with trinkets during the sale of Manhattan to the Pilgrims. Best real estate bargain in history! When I need something, I haunt antique stores and can find plenty of American-made products from over 50 years ago. No plastic. And plastic is made from oil, too. Brings down that demand as well.

  • bob

    You guys and gals are way to much! I do however agree with Mr M. Gov Goofy is right and so is Prez Odumba.

    Until we boot out these idjets the country is heading for h in a hand basket.

  • davey crocket

    stock market reflects some concern? rethugs are driving us into the ditch again. just look at where the economy and the markets are since they took control of the house again. try not to be so stupid as to vote rethuglican,

    • Mark

      Hey Davey, your liberals have control of the senate and white house. Republicans have just hit the brakes, Liberals have been driving for 4.5 years.
      Those stock market gains came from? Banks are not banking, for one. They are using our tax $$ TARP – instead of lending it, which would create jobs and was what it was supposed to be used for. They are speculating again. Billions of TARP $$ in stock market. No jobs created. Rich got richer. And that is liberals driving the car!!!! These are Barny and Dodd croney paybacks

  • fitswell

    where are the jobs MIKE HOW ABOUT YOU HIRE us if you think its so good out there

  • Citizen

    @Mark. You are partly right because you have identified the money liquidity problem. However, the cause is underregulation of the financial sector and the U.S. tax code. Both can be attributed to both parties.

  • Murph

    This should be over and done by now.Otherwise it will be up to the people to dissolve the current Senate and House and banish them all to Kwitchirbichenstan on the frozen tundra in their underwear!The little morons.Tuesday we will know,Wednesday we may have to form a militia!WQe’ve had enough and we aren’t going to take it anymore!

  • Citizen

    Take heart from what Robert Reich said on his blog a couple of days ago:
    “…That we’re calling it a “budget crisis” and worrying that if we don’t “solve” it we can’t pay our nation’s bills is testament to how successful Republicans have been distorting the truth.

    The federal budget deficit has no economic relationship to the debt limit. Republicans have linked the two, and the Administration has played along, but they are entirely separate. Republicans are using what would otherwise be a routine, legally technical vote to raise the debt limit as a means of holding the nation hostage to their own political goal of shrinking the size of the federal government.

    In economic terms, we will not “run out of money” next week. We’re still the richest nation in the world, and the Federal Reserve has unlimited capacity to print money.

    Nor is there any economic imperative to reach an agreement on how to fix the budget deficit by Tuesday. It’s not even clear the federal budget needs that much fixing anyway.

    Yes, the ratio of the national debt to the total economy is high relative to what it’s been. But it’s not nearly as high as it was after World War II – when it reached 120 percent of the economy’s total output.

    If and when the economy begins to grow faster – if more Americans get jobs, and we move toward a full recovery – the debt/GDP ratio will fall, as it did in the 1950s, and as it does in every solid recovery. Revenues will pour into the Treasury, and much of the current “budget crisis” will be evaporate.

    Get it? We’re really in a “jobs and growth” crisis – not a budget crisis.

    ….Repeat after me: The federal deficit is not the nation’s biggest problem. The anemic recovery, huge unemployment, falling wages, and declining home prices are bigger problems. We don’t have a budget crisis. We have a jobs and growth crisis.

    The GOP has manufactured a budget crisis out of the Republicans’ extortionate demands over raising the debt limit. They have succeeded in hoodwinking the public,….”

    • Tim

      Reich is a hack.

    • O-done-a

      I “heart” Citizen. Applause for reason. Keep it comin’.

  • Citizen

    @Tim. Would you care to explain that comment, sir? It appears to me that aside from opined comments about what he considers the biggest problem, he is stating historical facts about the budget and deficit.

    • Tim

      He is a hack and to say we have a jobs problem is nothing more than stating the obvious. Of course lower the rate of unemployment the more taxes we take in, you don’t need to be a rocket economist to know that. What he doesn’t say is the reason we have this unemployment and business uncertainty is because of Obamas plan. Obamacare, Cap and Tax, increased regulations on certain industrys, attack on oil and coal, union pushing, etc. All these cause uncertainty in businesses and force them to play it safe. Until Obama is gone the unemployment rate will continue to be high. The only thing we can do until he is gone is to cut spending.

      • Citizen

        Tim, you might want to consider that the government (both Dems and Thugs) have not supported a full employment plan since the time of Reagan. The bogus reason was inflation–long gone except for oil spikes. Increased taxation of the wealthy encourages them to find PUBLIC places to invest their money in order to avoid giving it to the government. PUBLIC meaning corporations and investments. Lower income taxes on the wealthy encourage them to hoard it for personal gain because they don’t need a tax shelter of investments. This is a very simplified explanation for you as to why higher taxes on the wealthy actually encourage investment and jobs production. Really, the only problem with President Obama (aside from his political naivete) is that the GOP will do ANYTHING to stop his getting reelected, including all your concerns and more–trashing America’s economy for their own party’s self-aggrandizement and success. My definition of treason and subversion.

        • Tim

          If you ever ran a business you would understand but instead you get your thoughts from books not reality. We need to budget based on knowns. Right now there are to many unknowns. Cost of heathcare, card check/right to work state, energy cost going up because of carbon regulations and cost of gas/oil.. Until we know what our business will cost to run we are doing what we can to stay in business and that is run lean.

          • Citizen

            Tim. Give it some hard thought. Why are you experiencing so many unknowns and uneasiness in your business? And don’t forget that the term “risk management” is an oxymoron. You should not let fearmongers run your business.

            • Tim

              Its not fear its whats called a budget. If you don’t know what your expenses will be beyond tomorrow you don’t expand. A business, unlike the government, must pay the bills. You must error on the side of caution or you will be out of business very quickly. You need to know what transportion will cost, what raw materials will cost, what employees will cost. Its real life not an economics book. Its obvious by your question you have no idea.

              • Citizen

                You are wrong, Tim. I have a very good idea because since I retired I work part-time for a small business that is very much dependent on the price of gas and employees. But, the owner just keeps moving forward. He doesn’t let uncertainty paralyze him at all. He’s pretty flexible, pretty knowledgeable, and just keeps on truckin’. I admire him a lot.

            • Nick

              I’ll give you one unknown thats a quote from Obama. “So if somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.” As coal provides half of our electricity its quite obvious our power cost will skyrocket but how much and when is unknown. Obama said it will go up dramatically. It will cost everybody.

      • the crux of the buscuit

        Tim – When you say Reich is ‘stating the obvious’, that realy means you are agreeing with him you know. I’ll bet your gonna miss old Glenn Beck won’t cha!

        • Citizen

          Crux, Glenn Beck is truly an embarrassment. It has always remained true that if you give people enough rope, they will hang themselves! A closed mouth gathers no foot! But these righties have such big egos that eventually they go too far in their rantings.

        • Tim

          Reich was Jimmy Carters main man on economics. Need I say more.

  • the crux of the buscuit

    I have two questions. My inlaws are retired and both are pushing 80. They live on Social Security, Medicare and a small pension. They pay no federal taxes due to having such a low income.

    Question 1 – How much in taxes should these two pay?

    Question 2 – Why won’t Republicans agree to having the super wealthy pay the same tax rates they paid when St. Raygun was president?

    • Jack

      Reagon raised taxes for a short period to clean up the mess left by Jimmy. He also cut spending in Washington as much as he could with a demacratic congress. He was totally against raising taxes though.

  • jan

    How about working your whole life until you’re 71, having two jobs, working instead of taking vacations, paying all your bills on time and investing in treasury bonds so you won’t have to worry about money in your old age. Been there, done that and now I’m facing zero income if the government defaults. Oh yeah, the third quareterly payment on my income tax is due Sept. 15 but I’ll have no income. How about that???

    • O-done-a

      Jan, I seriously always admire your story. Amazes me that you’re sitting on a million in bonds. YOU WILL get your checks for SS and interest as usual. No matter what. Do not let these fearmongers freighten you into thinking otherwise. You will get your checks.

  • Experts Say Don’t Panic Over Debt Ceiling Just Yet « CBS Minnesota

    […] [WCCO] Share this No comments // […]

  • health

    That was very illuminating blog post

  • Drip Feed Blast

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  • Dripable

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  • health and safety

    You are precisely right with this one!!!

  • Latest Music News

    You could definitely see your skills within the paintings you write. The world hopes for more passionate writers such as you who aren’t afraid to say how they believe. All the time go after your heart.

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