Debt Ceiling Crisis Will Hurt Michigan, America


The holdup in Washington will have a major impact in Michigan if the debt ceiling isn't raised by next Thursday. That's because the government has already spent the money. By not increasing it's borrowing limit, it will than have to juggle which bills it will pay and when.

"So right now with the government shutdown, staff is either essential to functions or non-essential. What will happen with the debt ceiling is bills will become essential or non-essential," said Jeff Williams, the CEO of Public Sector Consultants.

The bills the government pays include your grandpa's social security, your cousin's military paycheck and your neighbor's food stamps. If the debt ceiling isn't increased--whether it's head start programs for kids or paying government contractors--the government will only be able to pay bills as tax money comes in. There's no more floating money with credit.

Economists say defaulting on the country's debt could have a bigger impact on the economy than the recession in 2008--especially in Michigan.

"One of our main industries, the auto industry sells a product that usually has to be financed by a borrow," said Patrick Anderson, the President and CEO of the Anderson Economic Group.

Loan interest rates could go through the roof if the country's bills aren't paid. That would have a snowball effect. Workers could be let go temporarily, not to mention the potential drop in the stock market and impact on people's retirements.

"Since the U.S. has never defaulted before, we don't know for sure, but it has definitely the potential to be a financial catastrophe of the first magnitude," said Dr. Charles Ballard and economist at Michigan State University.

"Congress needs to do what's in the best interest of the American people and what's in the best interest of the American people is ending the shutdown, taking care of the debt ceiling, and then setting forth a course to start to address spending and government growth and everything else," said John Nixon, the State Budget Director.

Currently the state has enough money to continue operating until November 1. After that, the 1.6 million people in Michigan who depend on food stamps would lose their benefits. The program costs about $240 million every month in Michigan--money the state gets from the federal government.

"The debt ceiling is just a fundamental core principle. We don't default on our debt. We are America. One of the strongest credits in the world, and defaulting on the debt would have major problems. It would be a major catastrophe for our country," said Nixon.

The last time the country went up to the edge of the fiscal cliff, the country's credit rating was diminished. Standard and Poor's lowered it from AAA to AA minus. Threatening to not pay bills on time has a real impact.

"It's a mess. No matter which way you slice it," said Williams. "It's embarrassing. It's another self-inflicted wound to the U.S. stature across the world."

In Michigan as many as 15,000 state workers are entirely or in part funded with federal dollars. The state has already sent those 15,000 workers furlough notices.

"Every one of those furloughed workers--they used to be spending money at a particular rate. Well now, if you don't know when your next paycheck is going to come, you are cutting back. You are not going out to dinner and a movie--that's for sure," said Ballard. "You're probably not spending as much at the hardware store, the clothing store, or the grocery store. Well that means that all of those retailers are seeing a decrease in their sales."

"If you've ever been at that razor's edge where you are getting a paycheck and it's not enough to cover all the bills sitting on the kitchen table, and you're having to pick, I'll pay these two bills first and as soon as this money comes in Thursday I'll pay this next bill--that's were we are going to be next week in terms of the federal government," said Williams "It's going to be picking and choosing which bills to pay and which bills will stay on the kitchen table for another few days."


WILX.com is happy to provide a forum for commenting and discussion. Please respect and abide by the house rules:

Keep it clean, keep it civil, keep it truthful, stay on topic, be responsible, share your knowledge, and please suggest removal of comments that violate these standards.

powered by Disqus
WILX 500 American Road Lansing, MI 48911 517-393-0110
Gray Television, Inc. - Copyright © 2002-2014 - Designed by Gray Digital Media - Powered by Clickability 227156771