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Why Businesses get hurt if debt ceiling isn’t raised

Many business owners are conservative.   They obey the laws, watch their spending, and are cautious.   Many will say that the Government should not increase the debt ceiling knowing that the Government will be taking on more new debt.    It is a good idea for the Government not to take on new debt, but not this way.

Currently, the Government spends over 40% more than it takes into it’s coffers in revenues.   Economists have argued in past years,  by what percentage the Government can cut it’s spending in one year without hurting the economy, and many Economists felt that a cut of just 4% per year would slow down the economy short term, even if long term it benefits the country.

If the debt ceiling is not raised, or raised within one or two days after the deadline, the stock market will take a major dive.  Individuals will pull back on spending until they are comfortable with what will happen.  Large Corporations will follow suit and put on hold and delay any hiring or expansion plans.    Interest will continue to be paid or the country would suffer a true technical default.   World markets will truly be aghast and dive mostly due to the reckless self destruction.   Moody’s and Standard and Poors may impose another credit downgrade, further aggravating markets.

The Government will truly be forced to choose who receives Government money and who does not.   Watch in amusement as some of the same Congressmen and Senators who voted to not raise the debt ceiling suddenly demand that the flow of money continue for their districts.   Unemployment benefits, assistance for farming, highway money, and Government contractors will undoubtedly be among the first victims of a massive spending cut.   Companies that provide products for the military will also take massive cuts because Congress will make every effort to pay the soldiers.   If the department of education takes cuts this will cut funding to colleges and schools.   Other departments such as the Commerce department, the department of labor, and the State Department would all very likely take cuts.

While many people feel this would be good in principle, the state department includes funds for Embassies and Consulates, including the defense of those organizations.  The commerce department includes food safety and inspection.   Funding for Ports and border security have to be considered.    If the Department of Homeland security is cut, then many functions now happening would slow down.   Many of these employees would be temporarily cut.

The media effect would be tremendous.   Media outlets will interview unemployed and furloughed employees who will vent vicious frustrations.    Public opinion polls will reflect the worst ratings for Congress ever in it’s history.    Such a situation will be guaranteed not to be long term.    Congress will then quickly raise the debt ceiling.   Renewed talks of whether tax increases are justified in order to pay for desired services will begin.    People will realize the value of services lost, previously taken for granted.    Once it is accepted that the national debt must be address long term, their new found dependence of services will be weighed versus revenue increases and future proposed spending cuts.