States brace for debt ceiling default
July 21st, 2011
09:30 AM ET
3 years ago

States brace for debt ceiling default

NEW YORK (CNNMoney) - Just the threat of a federal default is prompting California to get a $5 billion loan to make sure it can pay its obligations.

States around the nation are drawing up contingency plans in the event that federal policymakers don't resolve the debt ceiling impasse by Aug. 2. They are preparing for chaos in the municipal debt markets and delays in federal payments for Medicaid, education and other services, which could happen if the federal government defaults on its obligations.

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Filed under: CNNMoney.com • Debt • Deficit
soundoff (11 Responses)
  1. bb

    We should ALL be bracing ourselves for a default. We thought 2008 was bad. We aren't even fully recovered from that event, and here comes another wave. The debt ceiling issue is SEPARATE from all the other arguments Congress is either boggling themselves down with, using it as a grandstanding platform, or trying in fact to make our economy fail again (i.e. Eric Cantor's hedge fund against the debt talks).

    The important thing – IF our credit rating is lowered on a debt as large as ours – it will cost trillions more in interest alone by the raised interest rates that follow a lowered credit rating. All this ridiculous grandstanding and unwillingness not to COMPROMISE under the ruse of fiscal responsibility is nothing more than empty talk. Real concern for the American public would be to avoid another economic failure by raising the ceiling (which is reflective of PAST DOLLARS SPENT – Bills that are due), and then work towards a debt plan. These are 2 SEPARATE ISSUES. BREAK THEM UP! But raise the ceiling now.

    July 21, 2011 09:50 am at 9:50 am |
  2. Rudy NYC

    All of this talk about how we can pass by the deadline and still be able pay our bills with existing revenue as it is accumulated is a complete lie. The people who say it are either misinformed or are misinforming.

    We have already past that point. Remember? Back in the spring?

    Congress was in the midst of an annual budget battle which could have shut down the government. They kept passing temporary extensions of a few weeks. But all of the talk at the time was for this battle, the debt ceiling. Remember? We had a deadline in April(?) that we had to meet. We had just settled on a final solution for the FY2011 budget.

    Treasury Secretary Gietner announced that the spring deadline was not the event horizon; the point of no return. Secretary Geitner announced that he could continue to pay bills with funds on hand until Aug. 2. After that date, we would not be able to meet all of our *existing* obligations on timel; that we would default if nothing is done by Aug 2.

    The debt limit isn't a blank check to spend more money. Only the House originates and authorizes all spending. The debt limit authorizes the Treasury to borrow money to pay for existing expenditures that have already been authorized by the House.

    July 21, 2011 09:51 am at 9:51 am |
  3. Democrat Class Warfare & Race Baiting - Destroying the economy, destroying the country

    Interesting that even the states are so dependent on the huge teet of the federal government. It demonstrates the level of control, through money, the federal government has over states.

    The federal government shutting down does not affect the people that work every day for a living so half of what they make can be confiscated by the government. It would be interesting to see just how many people in this country have become dependent on the federal government. The huge federal teet just continues to grow and grow, never ever shrinking, only growing, growing, growing, redistributing money from those who produce to those that do not.

    July 21, 2011 09:58 am at 9:58 am |
  4. Rudy NYC

    The Republican party has become the party of reneging on their promises. They promised the American people that the Bush Tax Cuts were temporary. Republicans worked out a FY2011 budget deal and now they are reneging on it to get more cuts with the debt ceiling battle.

    Republicans campaigned on jobs, and promised the American people jobs last year that they would deliver jobs. And, now they have reneged on that promise. In fact, every broken promise has been an attempt to push a social engineering agenda.

    Even Republican Governers have been reneging on promises. Gov. Walker (R-WI) reneged on his campaign promises to balance the budget and began depriving the middle class workers of their rights. Gov. Christe (R-NJ) has been more aggregious than Walker. He negotiated a deal with his Democratically controlled legislature to restrict collective bargaining in exchange for what Democrats wanted. Democrats passed the bill, but Christie reneged and used his line item veto to remove all of the compromises. Christeie lied. Walker lied. The Republican House has lied. All that we hear from them are words and promises that always turn out to be lies.

    July 21, 2011 10:01 am at 10:01 am |
  5. Bill from GA

    This default is just one more tool in the repug arsenal to destroy our country and try to blame our President. They want to win at any cost to America.

    July 21, 2011 10:06 am at 10:06 am |
  6. Sniffit

    And which states will be hurt worst? That's right: the red ones that take in more federal dollars than their taxpayers pay in.

    Keep voting against your self interest though, guys...can't have those scary brown people taking over your krischun nashun now can you? You gotta "take it back."

    July 21, 2011 10:12 am at 10:12 am |
  7. Rudy NYC

    Some seniors are getting nervous about their SSI checks. Many blame the President for not "compromising" with Republicans and simply signing off on a deal to cut spending. I wonder how many of those same seniors realize that the President is fighting for thenm to keep getting their familiar checks, and not ones that have been but through the Republican reducing machine. If you Republicans had their way, SSI would be privatized today, and your retirement would go to some hedge fund manager.

    July 21, 2011 10:13 am at 10:13 am |
  8. Romney in 2012

    Why is our president so against cutting spending? Everyone in this economy has had to cut down on spending. Yes, he likes to look like he is doing something. He says that he will 'freeze future spending'. He takes too much credit for stuff that would happen whether he is there or not.

    July 21, 2011 10:21 am at 10:21 am |
  9. A True Centrist

    Notice Indiana is not on that list...Indiana has a surplus now that the governor stuck it to the unions. Wisconsin will be next, then NY and MA (yes, even the Dem governors are cutting the union sweetheart deals).

    Time for the unions to realize their days of ripping off the taxpayers are over.

    July 21, 2011 10:31 am at 10:31 am |
  10. Sylvia Saint

    Gee-

    This must mean that all those states that claim to have balanced budgets are being financed with "free money" from the FEDERAL GOVERNMENT. Otherwise there would be no need for them to take action to replace what they WON'T GET in the case of a national default. It's like those that were railing against the Stimulus but couldn't get the money fast enough.

    All those Republican Governors claiming to be expert fiscal managers [like Romney or Pawlenty or Huntsmann] are simply mooching off the borrowing of America. I wonder how many voters have enough of a critical eye and probing intellect to see the lies for what they really are?

    July 21, 2011 10:44 am at 10:44 am |
  11. B

    Incompetence abounds in Congress and primarily with the Republicans in a lock down about zero compromise.

    They are going to pay a huge price for their intransigents ! The biggest losers will be ALL of us allowing those idiots to get away with it.

    July 21, 2011 10:46 am at 10:46 am |