Of course, President Obama, the House and the Senate are going to find some way to merge their competing plans and raise the debt ceiling before August 2.
But what if they don’t?
Two things would happen.
First, the global economy, already shaky, would become even more so. The world’s safest investment, the United States government, would become a lot less safe. Don’t believe it? Consider how the world has reacted to little Greece’s troubles.
Second, the debt would grow, not shrink, despite what some congressmen are telling us. American taxpayers currently pay a very low interest rate on the debt because the government is seen as such a safe investment. What happens if the government is no longer seen as a safe borrower? The same thing that happens if you or I are seen as unsafe borrowers – investors demand higher interest rates in exchange for their capital. Who will pay those higher interest rates? Taxpayers.
Here’s more in this week’s Arkansas News Bureau column.