UNL economics professor talks debt crisis

With the August 2 deadline looming and still no deal in resolving the debt crisis in Washington, D.C., should people be worried?

One economics expert, UNL Professor Eric Thompson, says it's likely this government decision won't affect anyone because he thinks it will get resolved.

In the meantime, Moody's Investors Service is threatening to lower America's bond rating.  Some national experts say if that happens, interest rates will go up.  Wall Street will go down.  Thompson, tells us many analysts are looking only at the scariest scenarios.  “If there is a default on the debt, I would imagine that would lead to a significant disruption in the economy, but I don't know that it would be the same type of very deep recession that we saw in 2009.”

Its impact would mostly be for federal spending; cutting back to $0.40 to every dollar the government is paying out right now.  Thompson says, “It's not clear that passing this deadline of August 2 would necessarily lead to a default on our debt.  It may be possible to continue making interest payments, but cut back on other types of spending.”

Social security checks could still get mailed and interest rates and loans for people here in Lincoln could stay the same.  Thompson says, “There is a significant chance this will be resolved and there will be no sort of no default, so I don't know that I'd necessarily give advice someone to go out and make a purchase now or get a loan now.”