What We Just Avoided With the Debt Deal

Our leaders in Washington finally came together and did what was right for the country. Even though there will still be some political posturing about who won the debate, the fact is, they finally listened to all the reports of what would happen if a deal were not made. My PolicyMic colleague, Jordan Wolf, has already laid out what the deal means going forward. Even with our credit rating still at risk, let’s look at what we are avoiding, and whether or not the darkest days truly would have been ahead.

The cost on consumers would have been far reaching. We were warned about what would happen with our credit rating with no deal, but even the news media around the world still recognize this as a possibility. The impact on world markets could still be felt, making interest rates on mortgages, car loans, and credit cards still rise and impact consumers' pockets. Access to credit, which was slowly starting to open up, could once again tighten. The housing market could crash again as people qualify for less homes with rates going up, and sellers sit on homes and drop the prices even more. The markets could have crashed, making people's investment and retirement accounts bottom out. This would have been just the beginning, but some of these could still be felt.

We already know we don’t raise enough revenue to cover our expenses, which is why we are in this position in the first place. The question was about to become, how do we use the money we do have to pay bills that are due? And let's be clear, this was not just about paying bills, but also about having a functioning government. The Treasury Department could not pick and choose what bills they would pay. They have said they would pay them as they come with what is available. This means, if your paycheck or benefit check were further down the list, you wouldn’t get paid on time or even at all. This was an even worse proposition for the poor and minorities, as welfare and housing assistance were certainly going to take some hits.

The big issue we avoided was the grey area that would have occurred when people’s paychecks didn’t come. Would guards at federal prisons have shown up for work, would our mail have been delivered, would our military readiness have been impacted, and would judges and federal prosecutors have been available? If not, how would this have impacted security and the ability of our nation to function? 

The good thing is that we don’t have to answer any of these questions, unless of course we find ourselves in this same position in 2012. Congress finally acted in the best overall interest of the country and made a deal.  Even if you think it is a flawed deal, it allows our country to move forward and deal with our issues like job creation, debt reduction, and tax reform without the threat of default looming over our heads. We avoided what would have been a dark period of uncertainty and that should be a good thing for everyone. 

Photo Credit: Nick Nunns