LEWISBORO, N.Y. -- As Democrats and Republicans continue to engage in a stand-off as the Tuesday deadline approaches to raise the debt ceiling, local officials say if an agreement isnt reached by then, it could mean some dire consequences for local governments and their constituents.
While its been widely reported that if Tuesdays deadline isnt met, the government will default, thats technically not true, officials say. Default happens when interest on loans is not paid, however, officials say there will be enough money from tax revenue to cover those payments.
I agree that the definition of default is more technically detailed than used in common parlance, said Congresswoman Nan Hayworth (R Mount Kisco), of New Yorks 19th district. The treasury will still be able to pay our sovereign debt obligations.
That, Hayworth, said includes treasury bonds, Social Security, and Medicare. Those debt obligations will be taken care of, she said.
Hayworth also noted that while everyone is focused on the Tuesday deadline, she said knowledgeable observers say it could be a few days longer before the impact of the failure to raise the debt ceiling is felt.
It could be a few more days (past Aug. 2), she said.
However, if those days do pass without any resolution, Hayworth said the local governments and organizations in Westchester County will most likely to feel the pinch with things such as Community Development Block Grants. She said the treasury department would have to prioritize its payments and items such as Social Security, Medicaid and military paychecks would likely be at the top of the list and not grants.
Some might have to give an IOU to their local contractors if theyre willing to take one, she said.
Congresswoman Nita Lowey (D - Harrison), of New Yorks 18th district, said in addition to a possible delay in Social Security benefits and other services, failure to raise the debt ceiling could result in higher interest rates that could impact the cost of mortgages and credit card payments.
Families could lose thousands of dollars from retirement savings and investments, she said. It is clear that Congress and the president must agree to a plan that ends the default crisis and includes responsible spending reductions that do not balance the budget on the backs of the most vulnerable Americans.
New York State Senator Greg Ball (R, C Patterson) said the fallout would be especially trying for the state because he feels New York does not rebound quickly from fiscal crisis.
Historically, New York State takes twice as long to recover from an economic downturn, he said. So, any recovery caused by this would be doubly hard. It would go beyond lost grant money. It would cause a problem balancing the state budget. Its odd that Washington is making Albany look good right now. But all I can say is this would be devastating at both the state and local level.
As for local municipalities, Lewisboro Town Supervisor Charles Duffy said its still unclear just how the crisis would affect local town boards.
I am not sure, and quite frankly. Few people are sure what the impact of the debt crisis will be on local towns like ours if an agreement is not reached soon, he said.
What Duffy said he is afraid of is how credit rating agencies will react. The Town of Lewisboro just had its rating lowered for the second straight year and while a recent audit revealed town is back on the right track, Duffy said the debt crisis could derail that progress.
The rating agencies will act no matter what if federal government fails to rein in the deficit, he said. We just experienced this in Lewisboro. Standard & Poor's, as expected, downgraded our debt rating again due to the fact that we still were in a deficit fund balance, even though we had the first positive operating result in six years. An agreement that raises the ceiling but does not address the deficit will lead to further downgrades. Look at Westchester County. Even as Standard & Poor's has raised our outlook in Lewisboro from negative to stable, they took down the county's bond rating and put them on negative credit watch.
Hayworth said she doesnt feel Congress is making a political football of the issue and is being earnest in its efforts to solve the problem.
I dont have a sense that they are trying to play chicken, she said. Its just awfully challenging to reach a consensus.
Click here to sign up for Daily Voice's free daily emails and news alerts.