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Weston Official: U.S. Unlikely to Default

WESTON, Conn. – "I think everybody else has to live within their means, and the government should, too," says Honey Rechtman, a Weston resident.

But 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. And 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 soaring 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.

"I don't think [the debt ceiling] should be raised. I think they should stop spending," said Rechtman.

Richard Darling, Weston's treasurer, said default is an "unlikely scenario" that would have "minimal to no impact on Weston's securities."

Weston has government-backed securities, said Darling, which are paid by mortgages. He said he expects the principal and interest to be paid. "There are no issues with regard to cash flow."

"I feel the likelihood of default is very small, and Congress will raise the debt ceiling," said Darling. He said the stock market would be one of the worst hit if the U.S. debt is downgraded below its triple-A rating. Weston has only one trust fund allowed to invest in stocks and equities.

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 the 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," Himes 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."

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."

Are you worried by the failure of President Obama and Congress to reach a deal on the debt ceiling? Leave a comment below.

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