As Republican members of the House of Representatives and the White House continue their talks on how to resolve the federal government shutdown, polls show that many Americans continue to be confused by the dispute.
The president and many economists have warned if Congress fails to raise the debt ceiling, the nation will default on its debts. But a growing number of Republicans in Congress say there’s plenty of revenue coming in to cover interest on U.S. debt. They insist holding the line on the debt limit would force spending cuts.
That concerns Mark Zandi, chief economist at Moody’s Analytics.
“I do worry that more people aren’t screaming about this,[that] more business people and stock investors aren’t more nervous about it,” he said. “Because that means there’s just less pressure on lawmakers to do the right thing.”
He said if the debt ceiling isn’t increased — which he called an unthinkable prospect — people are going to find out what a big deal it would be for the United States to run out of money. He said stocks would plunge and interest rates would rise — and that would snowball, sparking panic in financial markets.
A recent United Technologies/National Journal poll found most Americans do not understand the debt ceiling, a finding that is reflected in the views of people in Minnesota. Here are some recent observations by visitors to the Mall of America, followed by Zandi’s responses.
Jeffrey Johnson said he’s not worried about the government possibly defaulting on payment obligations.
“Deadbeat is in the eye of the beholder,” said Johnson, 38, of Minneapolis.
He thinks the federal government really doesn’t need to pay all of its bills.
“You know, [it’s] the same way we do it in our households,” Johnson said. “We have certain bills we like and certain bills we don’t like, certain bills we keep paid up, certain bills we don’t keep paid up.”
Katy Dynan agreed with Johnson that a U.S. default would not necessarily trigger world-wide economic chaos.
“I don’t know. If I am late on a payment, am I forever damaged? No,” said Dynan, 30, of Burnsville. “I guess I don’t know how it looks on a worldwide spectrum, but I’m not going to lie, I’ve defaulted on a payment and here I am.”
Zandi said any notion that it wouldn’t be a big deal for the United States to default on its obligations is entirely misguided.
“The one thing that has made our economy the envy of the world is the fact that when we have our debts we pay them,” he said. “And it’s that confidence among people who lend us money that we will repay them that we’re able to borrow when we need to and at a very, very low interest rate.”
Zandi said easy access to low-interest money is critical to the U.S. economy.
Kinte’ James, said it doesn’t matter whether the debt ceiling is increased. James, 22, of Chicago, said we’re all in trouble no matter what.
“We’re in debt,” he said. “Whenever you’re in debt it’s a problem, so it’s going to be a problem regardless.”
“That’s too pessimistic,” he said. “We’re not in trouble.”
Zandi said the nation needs to address deficit spending, but he underscored that annual debt payments are very manageable, and amount to only about 2 percent of the nation’s yearly gross domestic product. The GDP, as it’s called, is the total dollar value of goods and services produced in the United States.
It doesn’t make sense for Republicans to say that the nation would not necessarily default on its payment obligations if the debt ceiling isn’t raised, he said.
Zandi said that math just doesn’t add up.
“Even though we take in a lot of tax revenue and other revenue, it’s not enough,” he said. “In fact, just to give you a sense of it, last year the budget deficit, which is the difference between how much we spend and how much we take in in revenue was over $600 billion. So that’s a very large number and that’s a hole that can’t be filled without borrowing.”