EASTON, Conn. Security patrols at the nation's borders could be dramatically reduced, airports and post offices shuttered, and interest rates on credit cards, mortgages, car payments and student loans may skyrocket.Social Security checks for the elderly and disabled could stop. In Connecticut, the financial services industry in Fairfield County and insurance industry in Hartford could collapse, creating a "catastrophic domino effect" that could ruin the state's top credit rating and send unemployment numbers even higher.
Those are just some of the possible scenarios if President Obama and Congress fail to make a deal on the federal debt ceiling by the Aug. 2 deadline, say state officials and the Connecticut Congressional delegation.
"If the United States defaults, it would increase interest rates across the board," said Easton First Selectman Thomas Herrmann. "It would have as huge an impact on our economy as the near default of banks did in 2008."
Herrmann said the financial default could cause "dramatically higher" interest rates when Easton goes to refinance in a year. The town recently refinanced its interest rate to 0.32 percent per year on short-term borrowing of about $8 million, Herrmann said.
If Social Security checks aren't sent out, it would have a "significant impact on the community," Herrmann said. "The [government] needs to come to some sort of compromise. The debt ceiling needs to be extended America simply cannot default on its debt end of story."
U.S. Rep. Jim Himes, D-4th District, says Congress must find a way to avert a first-ever U.S. financial default, which would impact global, national, state and local economies. "Most people don't realize the kind of devastating impact this could have on them," Himes said in a telephone interview Wednesday from Washington, D.C.
"Since it's never happened before, who knows what the federal government would be able to pay for," he said. "But if we go past Aug. 2 without a deal, there is a real possibility of a credit rating downgrade in the United States, which is like a nuclear bomb going off in the financial system."
Himes said the crisis has been brought about by politics. "The right wing of the Republican Party has driven us to this in its anti-tax fervor," he said. "With the state of our economy, this would be the worst possible moment imaginable for the Unites States to default."
U.S. Sen. Richard Blumenthal, D-Conn., agreed. "Raising the debt ceiling is essential, because defaulting would be catastrophic for job growth and our fragile economic recovery, and would dramatically raise interest rates," Blumenthal said.
Himes and Blumenthal say they have been inundated with calls and emails from constituents since Obama appealed to citizens to respond to the crisis in a national address Monday night. "Since then we have received about 900 calls and emails from constituents," said Elizabeth Kerr, communications director for Himes. "All but about 35 support the president's stance."
A Norwalk woman, identifying herself as a registered Independent, wrote to Himes. "I am at a loss to understand the Republicans' position. They'll ask for more cuts for the middle class and ask nothing from the rich."
Obama supports Senate Majority Leader Harry Reid's plan, which would trim $2.7 trillion of government spending over 10 years.
State officials say the crisis could cost the state more to borrow money. Ben Barnes, secretary of the state's Office of Policy and Management, said Connecticut could be hurt even if there is a deal.
"Defaulting would be a disaster, but I am also deeply concerned about some of the deals being considered," Barnes said. "It could have a terrible impact on Connecticut if there are cuts to much needed upgrades in transportation, education and the environment."
Himes said he expects a deal to be worked out between the president and Congress as the two sides "work feverishly over the weekend."
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