The arguments that have been taking place in our nation’s capital over whether to raise the debt ceiling have been going on for a while now. While individual consumers have not likely felt much of an impact from all of the debate, there is a date fast approaching where things may begin to happen if the debt ceiling is not raised. August 2, 2011 has been put out there as the date after which the United States will not be able to continue meeting its debt obligations if the debt ceiling is not raised.
What does this mean for the average American? There are a few ways in which individuals and families may be affected in the event that a compromise is not worked out. If you have invested in United States Treasuries on the advice that they are the most risk free type of investment that there is, your confidence is likely shaky at the moment. Treasuries have enjoyed a triple A rating, but ratings agencies may downgrade them after the beginning of August. Americans are likely to take their hard-earned investment dollars and invest them in other things instead.
If the government can not pay its bills, then which bills will get paid and which will not? The answer is anybody’s guess, but it has been stated that up to 40% of those “bills” will not get paid for a while. Advocates for many diverse interests are fighting to be first in line and at the moment it appears that military salaries and debt payments will take priorities over things like social security and unemployment. This is not good, considering that many Americans that depend on those checks are already in a precarious financial position as a result of the recession and slow job market. Also, credit will be even harder to acquire than it is right now.
Of course, as with any type of doomsday predictions, it is important to remain objective and keep a clear head. There is still time for a compromise on the debt ceiling to be reached before August 2. Also, the predicted effects of what could happen if the debt ceiling is not raised are just that – predictions. Right now, Americans are collectively holding their breath and waiting for the government to work out a compromise so that we do not have to find out the alternate ending to the debt ceiling story.
Photo by kconnors on morguefile.com.