Just beyond the government shutdown looms yet another big problem – the federal borrowing limit.
The Obama administration warned Thursday that a prolonged debate over whether to raise the debt ceiling would harm the economy by depressing business and consumer confidence, increasing stock market volatility, erasing household wealth and increasing interest rates on mortgage and corporate loans.
“It doesn’t matter whether you’re a Republican or a Democrat,” says WOKV’s Consumer Warrior Clark Howard.
“This is really all about the future of the United States of America.”
Howard says if Congress has a “nervous breakdown” and doesn’t raise the debt ceiling, it can lower American living standards for a generation or more.
“And it could have dire consequences for the country,” he says.
According to Howard, the U.S. is the world’s most powerful nation, and it holds the world’s currency.
“The U.S. dollar is the standard bearer for all the world’s currency,” he says. “Our promises to honor our debt are looked at as something that is not open to negotiation.”
Right now, the United States enjoys some of the lowest interest rates in the world.
“Because when anybody’s worried about anything in their own country, they come and put their money in the United States in some form of fashion. We’re the safe zone for the entire world.”
Howard says if we lose that “subsidy,” things will become more difficult for Americans.
“And that automatic leg up we have over the rest of the world suddenly isn’t there anymore.”
He says Americans won’t feel the effects right away, but over time people and banks all over the world will make one-by-one decisions that “the United States is no longer to be counted on.”
“If it costs us more money to do business in the future, we end up with ultimately a lower standard of living,” he says.
“We end up as individuals, as families, as companies, and as a country, less wealthy than we would have been.”
He calls it the federal equivalent of having your credit score lowered, or being penalized.
Congress has about two to three weeks to reach an agreement on the federal borrowing limit or the country risks defaulting on its financial obligations.