The U.S. government hit its statutory debt limit on Thursday, and the Treasury Department said it has begun resorting to “extraordinary measures” to pay the bills. If the federal government defaults, a Triad economics expert said that Triad residents, along with people across the nation, could see higher interest rates.DEBT LIMIT:According to NBC News, Treasury Secretary Janet Yellen said in a letter to congressional leaders on Thursday that those special financial tools to meet the country’s obligations can continue until at least Monday, June 5. After they expire, Congress will need to act to prevent default.Yellen said in the letter that “the period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenge of forecasting the payments and receipts of the U.S. Government months into the future. I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”Yellen’s warning comes as the new Republican House majority, led by Speaker Kevin McCarthy of California, demanded conservative policy concessions in the form of spending cuts to lift the debt ceiling.”Let’s change our behavior now. Let’s sit down. He’s the president. We’re the majority in the House. The Democrats are the majority in the Senate. And that’s exactly the way the founders designed Congress to work, find the compromise and find the commonsense compromise that puts us back onto a balanced budget,” McCarthy told reporters on Tuesday on Capitol Hill.WINSTON-SALEM STATE UNIVERSITY:WXII 12 News talked with Zagros Madjd-Sadjadi, chair of the department of accounting, economics, and finance at Winston-Salem State University, to learn more about the debt limit and how it could affect people in The Triad.”The current statutory debt limit is 31.381 trillion dollars,” he said.Madjd-Sadjadi said the debt ceiling is a financial limit that is self-imposed by the United States government on how much it will borrow.He said the federal government defaulted on roughly $122 million in 1979, which caused a 0.6 percent interest rate increase.”That was found even a decade later to have resulted in a permanent increase in our interest rates. It was much smaller than 0.6 percent but still significant,” he added.If the United States defaults on the trillions of dollars of debt, it could “have a ripple effect. Nobody then wants to lend money to us,” the chair said.The professor said, “Each of these things mean fewer people are going to be able to buy homes. Fewer people are going to be able to buy cars. Fewer people are going to be able to refinance. Fewer people are going to be able to take student loans. Fewer people are going to be able take out personal loans.”The chair continued to add that a default would impact the credibility of the U.S. dollar since it’s the reserve currency for the world. He said, “People aren’t going to want to loan us money. They’re not going to sell us goods, and we can’t import as much.””The dollar itself is going to start falling in value. If the dollar starts to fall in value, that means all those goods we buy, the computers, our cameras, a lot of our cars, those all will become more expensive. So that’s going to be true. But of course, the stuff we make will be cheap. There is this give and take, but it’s not going to be pleasant. This is not something they should be playing with,” he added.SMALL-BUSINESS IMPACT:WXII 12 News went to Sweet Potatoes, a small business in Winston-Salem that has been operating for 20 years.Vivian Joiner, co-owner, said the past few years have been challenging due to the economy. She said running a small business hasn’t been easy, especially with high inflation, higher interest rates, and a labor shortage.”Our small business is facing all manner of cost increase, from groceries to labor to services rendered. It’s just across the board,” she shared.The latest item used in her business affected by inflation is eggs, she said, which her team uses in many meals and recipes.”It would cost us about $.15 to put an egg on a plate, between the labor and the cost of the egg. Now that same is going to cost us almost a dollar to just put it to the plate per egg.” She added, “Years ago, we didn’t have a fuel charge (shipping services). Now we do. When the gas price goes up, that fuel charge goes up. You can’t change your menu-item cost that often. You can’t change those things that quickly to combat that.”On top of the current challenges, Joiner said the possible effects that could result from a possible federal default would be “frustrating. It’s hurtful. It kind of deflates you a little bit.”However, she said she is optimistic about the future. She said her team and resources give her hope.But she is aware of how many small businesses in The Triad have been affected by the COVID-19 pandemic and is also concerned about how a possible default could impact many.”If we’re not careful, we’ll have another round of a lot of things closing, and if you want something to be there when things get better, you have to support it when it’s bad,” she shared.
The U.S. government hit its statutory debt limit on Thursday, and the Treasury Department said it has begun resorting to “extraordinary measures” to pay the bills.
If the federal government defaults, a Triad economics expert said that Triad residents, along with people across the nation, could see higher interest rates.
DEBT LIMIT:
According to NBC News, Treasury Secretary Janet Yellen said in a letter to congressional leaders on Thursday that those special financial tools to meet the country’s obligations can continue until at least Monday, June 5. After they expire, Congress will need to act to prevent default.
Yellen said in the letter that “the period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenge of forecasting the payments and receipts of the U.S. Government months into the future. I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
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Yellen’s warning comes as the new Republican House majority, led by Speaker Kevin McCarthy of California, demanded conservative policy concessions in the form of spending cuts to lift the debt ceiling.
“Let’s change our behavior now. Let’s sit down. He’s the president. We’re the majority in the House. The Democrats are the majority in the Senate. And that’s exactly the way the founders designed Congress to work, find the compromise and find the commonsense compromise that puts us back onto a balanced budget,” McCarthy told reporters on Tuesday on Capitol Hill.
WINSTON-SALEM STATE UNIVERSITY:
WXII 12 News talked with Zagros Madjd-Sadjadi, chair of the department of accounting, economics, and finance at Winston-Salem State University, to learn more about the debt limit and how it could affect people in The Triad.
“The current statutory debt limit is 31.381 trillion dollars,” he said.
Madjd-Sadjadi said the debt ceiling is a financial limit that is self-imposed by the United States government on how much it will borrow.
He said the federal government defaulted on roughly $122 million in 1979, which caused a 0.6 percent interest rate increase.
“That was found even a decade later to have resulted in a permanent increase in our interest rates. It was much smaller than 0.6 percent but still significant,” he added.
If the United States defaults on the trillions of dollars of debt, it could “have a ripple effect. Nobody then wants to lend money to us,” the chair said.
The professor said, “Each of these things mean fewer people are going to be able to buy homes. Fewer people are going to be able to buy cars. Fewer people are going to be able to refinance. Fewer people are going to be able to take student loans. Fewer people are going to be able take out personal loans.”
The chair continued to add that a default would impact the credibility of the U.S. dollar since it’s the reserve currency for the world. He said, “People aren’t going to want to loan us money. They’re not going to sell us goods, and we can’t import as much.”
“The dollar itself is going to start falling in value. If the dollar starts to fall in value, that means all those goods we buy, the computers, our cameras, a lot of our cars, those all will become more expensive. So that’s going to be true. But of course, the stuff we make will be cheap. There is this give and take, but it’s not going to be pleasant. This is not something they should be playing with,” he added.
SMALL-BUSINESS IMPACT:
WXII 12 News went to Sweet Potatoes, a small business in Winston-Salem that has been operating for 20 years.
Vivian Joiner, co-owner, said the past few years have been challenging due to the economy. She said running a small business hasn’t been easy, especially with high inflation, higher interest rates, and a labor shortage.
“Our small business is facing all manner of cost increase, from groceries to labor to services rendered. It’s just across the board,” she shared.
The latest item used in her business affected by inflation is eggs, she said, which her team uses in many meals and recipes.
“It would cost us about $.15 to put an egg on a plate, between the labor and the cost of the egg. Now that same is going to cost us almost a dollar to just put it to the plate per egg.” She added, “Years ago, we didn’t have a fuel charge (shipping services). Now we do. When the gas price goes up, that fuel charge goes up. You can’t change your menu-item cost that often. You can’t change those things that quickly to combat that.”
On top of the current challenges, Joiner said the possible effects that could result from a possible federal default would be “frustrating. It’s hurtful. It kind of deflates you a little bit.”
However, she said she is optimistic about the future. She said her team and resources give her hope.
But she is aware of how many small businesses in The Triad have been affected by the COVID-19 pandemic and is also concerned about how a possible default could impact many.
“If we’re not careful, we’ll have another round of a lot of things closing, and if you want something to be there when things get better, you have to support it when it’s bad,” she shared.
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