LA CROSSE, Wisconsin (WXOW) – The country hopes to avoid default as the deadline to raise the debt ceiling looms.
Congress said they've made some progress but if they can't come to an agreement, the U.S. would still have money to spend.
But when that money runs out, they can't borrow any more, said Jacob Holt, UW-L assistant professor of political science.
"The debt ceiling has nothing to do with spending. It has no effect on spending because really what you're doing is saying, 'give us approval to pay the bills that congress already said you should pay," Holt said.
The debt ceiling is "the total amount of money the United States government is authorized to borrow to meet its existing legal obligations," according to the U.S. Department of the Treasury.
Those obligations include Medicare benefits, tax refunds, national debt interest and social security.
Holt said those checks could stop.
"So people who loaned us money say, 'I'm here to collect.' And we say, ‘We can't pay you.' That leads to a debt default. That could lead to higher interest rates. That would lead to borrowing costs for the U.S. long-term to skyrocket," Holt said.
So if a person takes out a loan or a mortgage, Holt said his/her interest rates could skyrocket, too.
"The federal government could just print money. The issue is how much those checks will buy," said Certified Financial Planner Jeff Lokken.
Lokken worries the value of a dollar will decrease if countries think the U.S. can't pay back debt.
"If a dollar today can only buy 50 cents worth of things in 10 years because it's declined in value, I think that's the substantive financial issue," he said.
Lokken said people will get their checks; it'll just be worth much less.
But it will only be an issue if the government chooses not to raise the debt ceiling by the Oct. 17 deadline.
ABC News reported if the government doesn't raise the debt ceiling, they would only have enough money to pay around two-thirds of bills. That will make them $106 billion short.
All content © Copyright 2000 - 2013 WorldNow and WXOW. All Rights Reserved.
Persons with disabilities who need assistance with issues relating to the content of this station's public inspection file should contact Administrative Assistant Theresa Wopat at 507-895-9969. Questions or concerns relating to the accessibility of the FCC's online public file system should be directed to the FCC at 888-225-5322, at 888-835-5322 (TTY) or at email@example.com.