As federal lawmakers huddled to reach an agreement to raise the federal government’s debt ceiling before Aug. 2, when Uncle Sam would run out of money to pay the U.S. government's bills, state and municipal leaders talked about how the crisis could hit close to home.
They said the fallout could be severe and long lasting.
Ramifications could include:
“We regularly borrow money in the municipal bond market, and it may impact interest rates, which could have a most likely negative affect on the state of Connecticut," Barnes said. "There may be some difficultly in accessing the capital markets for a period of time.”
Gov. Dannel P. Malloy sent a letter to congressional leaders and President Obama July 22 urging both parties to put politics aside and agree to raise the debt ceiling before Aug. 2.
Failue to do so would do great harm, Malloy wrote: “For Connecticut, such a failure would result in a serious disruption to our cash flow, negatively affect our access to the capital markets, and harm our local economy.”
Spending cuts
Malloy continued that some of the funding cuts already publicly discussed as part of the negotiations could cost Connecticut about $500 million in federal aid over the next 10 years, particularly if reductions in the federal government’s Medicaid reimbursement rate and Children’s Health Insurance Program were to be implemented.
An additional federal reduction in aid to graduate level medical programs could jeopardize the state’sBioscience Connecticut plan, according to Malloy, a proposal to pump $864 million into the University of Connecticut’s Farmington-based Health Center to renovate and expand the medical campus in an effort to transform it into one of the state’s primary economic drivers.
Barnes told Patch that although Connecticut had enough cash reserves to weather several weeks of missed federal payments or reimbursements, he was more concerned with the effects of reductions to pre-established programs the federal government may make as part of an agreement.
Such a deal, Barnes said, would mean that Connecticut would have to make further reductions to its current budget to plug the gap, as Malloy has stated he has no intention to raises taxes beyond the increases called for in the current budget.
City and town budgets
Locally, officials said that a federal default could result in higher interest rates on bonds and municipal debt, a slowdown or cessation of certain programs or projects funded through federal dollars, and a reduction in services or an increase in the local tax rate to make up for any federal shortfalls in local budgets that have already been enacted.
“One way or another we still have core services that we have to provide, “ said Denise Menard, East Windsor’s first selectwoman.
“Educating our children, plowing our streets, and we have to pay for it somehow, so if the federal government is going to be having less money coming down through the state to use then I would imagine that somehow we’re going to change our taxes.”
They said the fallout could be severe and long lasting.
Ramifications could include:
- A downgrading of the nation’s credit rating, which could affect global interest rates and roil worldwide financial markets
- Missed Social Security payments for millions, although most of those interviewed noted that many of the “worst case” scenarios predicted might not occur for several weeks after the Aug. 2 deadline.
- Spending cuts to existing federal programs, which would have a trickle-down effect on states and local municipalities who have already had to pare back budgets in recent years.
“We regularly borrow money in the municipal bond market, and it may impact interest rates, which could have a most likely negative affect on the state of Connecticut," Barnes said. "There may be some difficultly in accessing the capital markets for a period of time.”
Gov. Dannel P. Malloy sent a letter to congressional leaders and President Obama July 22 urging both parties to put politics aside and agree to raise the debt ceiling before Aug. 2.
Failue to do so would do great harm, Malloy wrote: “For Connecticut, such a failure would result in a serious disruption to our cash flow, negatively affect our access to the capital markets, and harm our local economy.”
Spending cuts
Malloy continued that some of the funding cuts already publicly discussed as part of the negotiations could cost Connecticut about $500 million in federal aid over the next 10 years, particularly if reductions in the federal government’s Medicaid reimbursement rate and Children’s Health Insurance Program were to be implemented.
An additional federal reduction in aid to graduate level medical programs could jeopardize the state’sBioscience Connecticut plan, according to Malloy, a proposal to pump $864 million into the University of Connecticut’s Farmington-based Health Center to renovate and expand the medical campus in an effort to transform it into one of the state’s primary economic drivers.
Barnes told Patch that although Connecticut had enough cash reserves to weather several weeks of missed federal payments or reimbursements, he was more concerned with the effects of reductions to pre-established programs the federal government may make as part of an agreement.
City and town budgets
Locally, officials said that a federal default could result in higher interest rates on bonds and municipal debt, a slowdown or cessation of certain programs or projects funded through federal dollars, and a reduction in services or an increase in the local tax rate to make up for any federal shortfalls in local budgets that have already been enacted.
“One way or another we still have core services that we have to provide, “ said Denise Menard, East Windsor’s first selectwoman.
“Educating our children, plowing our streets, and we have to pay for it somehow, so if the federal government is going to be having less money coming down through the state to use then I would imagine that somehow we’re going to change our taxes.”
