The shutdown and debt-ceiling fights appear to be merging... the hardline conservatives driving the House GOP leadership believe they are winning... It's Colorado Springs, not the Washington, DC area, with the largest percentage of its workforce receiving federal paychecks.
The impasse continues. Meanwhile, parts of the federal government remain closed. Among the latest developments: President Obama has invited leaders of both parties to a Wednesday evening meeting at the White House.
Although investors are worried about the government's current shutdown, there's greater concern about the debt ceiling -- the $16.7 trillion dollar limit on how much the U.S. government can borrow. If the limit isn't raised by October 17th, it could create a potential economic disaster.
Marketplace's Paddy Hirsch says while we often think of our debt as owed to foreign countries, America owes a lot of money to sources closer to home -- namely ourselves. Large institutions, individual investors, social security -- are all big buyers of U.S. bonds. But even regular Americans indirectly own a large chunk of our national debt -- through their 401(k) plans, retirement accounts, etc. They're buying U.S. bonds, which is lending money to the government.
"So in actual fact, we are lending money to ourselves and we’re actually borrowing money from ourselves," he says.
Hirsch says if we default on our debt, we won't be able to pay the interest on the money that we already owe. If the government doesn't raise the debt ceiling, borrowing costs will go up, and as a result Americans would have to spend a lot less.
"And that means we'll have to shrink government to a really, really small size," he says. "We’d be laying off millions of people who are employed by the government right now, which would sent unemployment through the roof, and then we’d risk a really serious depression."
Marketplace's Paddy Hirsch joins Marketplace Morning Report host Mark Garrison to discuss. Click the audio player above to hear more.
And so, the partial shutdown of the federal government continues. Today, President Obama is meeting with executives from some of the world’s biggest banks. It’ll be a chance for them to give Obama their take on the shutdown and the upcoming debate over raising the debt ceiling.
The way politicians have handled those two issues doesn’t instill much confidence in government.
“I think people in the business community are starting to get restless about this,” says Paul Argenti, professor of corporate communication at Dartmouth’s Tuck School of Business.
Today’s meeting is an opportunity for executives to convey that restlessness to the president. John Graham, a finance professor at Duke, says Washington dysfunction “is very troubling to the business community.”
“They want politicians to work together, to compromise,” he says. “And the two key words -- they want politicians to find solutions.”
Companies have trade groups in Washington, and according to Argenti, executives and lobbyists are on Capitol Hill, meeting with lawmakers. They are calling upon old friends.
“I think the business community probably supports the real Republican Party,” he says. “I don’t think the business community necessarily supports the radical wing of the Republican Party.”
More than anything, Argenti says, executives want “rational answers to these difficult questions,” and those answers aren’t coming from politicians on either side of the aisle.