Expert: Americans Shouldn't Panic Over Debt Ceiling -- Yet
MINNEAPOLIS (WCCO) -- By now, most Americans have probably heard the worst-case scenarios with hitting the debt ceiling: a dipping dollar, loan difficulties, a jump in interest rates. So, how likely is a worst-case scenario?
In the President Barack Obama's address to the nation on Friday, he reminded the country of the importance in reaching a deal.
"Keep in mind, if we don't do that, if we don't come to an agreement, we could lose our country's AAA credit rating," Obama said.
We talked to a St. Paul economist who says he's confident a deal will be struck to avert default -- and soon.
David Vang, Professor of Finance at St. Thomas, says there is no need to start panicking just yet.
"Even if the United States gets downgraded a little bit, we still will be -- maybe for another generation -- the best place to park your money, if you're looking for true safety," Vang said.
Vang says to think of the debt ceiling crisis in the same way you think of your personal finances. While we try to pay off bills and balance our budget, he says instead, Washington's charged bills to the national credit card. While he says big brother is watching, he thinks there's still time to recuperate some of America's losses.
"If this particular deal doesn't go as smoothly as we want it to, but we recover and do something else real soon, then I don't think rating agencies are going to downgrade us," Vang said.
In fact, he says the rating agencies are sympathetic to the fact it's tough to fix a problem that took decades to develop in just one year.
"In the long-term, are we going to have a situation where our government expenditures will be growing at a slower rate than the economy grows? If we have that, we're going to be financially sound," said Vang.
In the meantime, Vang predicts a deal in a week's time.
"Our politicians are not puppets or caricatures, they are human beings too," said Vang. "There's only so much pressure anyone can withstand before you want this painful experience to go away."
WCCO-TV also spoke with investment officers in town who say that although the stock market reflects some concern, they haven't been fielding phone calls from people worried about their investments, and think most people expect a resolution soon.
