Notre Dame professor explains impacts of debt ceiling standoff

 

With the federal government expected to default on its debts as soon as early June if Congress does not raise the debt ceiling, a professor at the University of Notre Dame says it would have real world consequences on everyday Americans. 

"[Financial regulators] are kind of marking June 1st as D-Day," said Dr. John Stiver, Associate Teaching Professor of Finance at the Mendoza College of Business. 

He says, if the US can't pay its bills, the fallout will most likely be felt in three ways:

• Check delays: Anyone receiving a federal check, like Social Security or a tax refund, may have to wait on payment
• Interest rate hike: Government bond interest rates will likely rise, meaning higher borrowing costs
• Bank runoff: The recent trend of smaller, regional banks closing may be exacerbated 

While Stiver doesn't expect the current back and forth between the White House and House Republicans to result in a default, Stiver says the uncertainty of debt negotiations could even have an impact. 

"The severity of this is going to depend on how long it takes to get resolved," Stiver said. 

President Joe Biden is expected to meet with congressional leaders to discuss the debt ceiling and possible spending cuts, Tuesday.