Many Americans confused by debt ceiling dispute

  1. Listen Many Americans confused by debt ceiling dispute

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.

Mark Zandi (Courtesy of Moody’s Analytics)

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 (MPR Photo/Mark Zdechlik)

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 (MPR Photo/Mark Zdechlik)

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.”

Zandi disagreed.

“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.”

  • Fred Garvin

    “Zandi said easy access to low-interest money is critical to the U.S. economy.”
    That’s one side of the coin.
    Low interest money also impedes savings and the economical benefits of savings and the interest on that savings. Less productive older folks have to work to supplement their incomes, instead of relying more on interest payments. Meanwhile, those older working folks take jobs from inexperienced younger and minority folks who need to develop job skills (and a love for a paycheck).
    Additionally, the added economic burden of PAYING the interest on the federal debt, and the burden on future generations was never mentioned by Zandi. Why not?
    Gee, was it impossible to find an economist with a different view of the debt?

  • Fred Garvin

    The WORST outcome is a delay on payments of the debt.
    Is Zandi willing to place a wager on his over-hyped chicken-little predictions?
    I am.

  • Jerry

    That’s the way to do it, you know. Every question has exactly two contradictory but equally correct answers, and it’s the responsibility of every news organization to present both of them with precisely equal merit. That’s journalism.

    • Fred Garvin

      No it’s not journalism when the two contradictory statements come from the same uneducated mouth.

    • Gayle

      Your sarcasm is duly noted, at least by this reader!

  • kevinfromminneapolis

    Sounds like you just talked to some idiots, including your banker. In one paragraph he says we’re not in trouble, in the next he casually dismisses a $600 billion budget deficit. There’s no way to slice a $600 billion deficit run YEAR AFTER YEAR as anything but deep, deep and calamitous trouble.