Unless you live under a rock or are marooned watching reruns of Thomas the Train with your three-year old, you have heard about America's debt ceiling crisis. It seems like a complicated topic, but really, it's pretty simple. Our government has maxed out its credit limit and no longer has the ability to pay all its bills.
Congress is trying to come up with a plan to raise the U.S. credit limit (what they are referring to as the "debt ceiling") so we can continue to make essential payments -- ahem, like social security. If Congress fails to raise the $14.3 trillion debt limit by August 2nd, the U.S. could default. Wait...what?!? America, the land of milk and honey, has run out of money and access to credit? A sobering reality. If we default, this scenario would have very serious ramifications for American citizens and small business owners alike. Experts are calling this scenario a "financial Armageddon".
What Happens If The Debt Ceiling Crisis Isn't Solved?
According to a CNN article, "Nearly half of all government checks won't be paid: The Treasury Department would be unable to pay between 40% and 45% of the 80 million payments it needs to make every month, according to an analysis by the Bipartisan Policy Center." In addition, the same CNN article states, "Americans could face rising interest rates, a declining dollar and increasingly jittery financial markets..." If this isn't ironed out, small businesses could face a credit crunch a la 2008, finding financial institutions even more reluctant to lend.
Another huge area of concern would be the impact on U.S. backed securities. Up to this time, U.S. Treasury bills and bonds have been the world's safest investment with a AAA rating because the United States has stood behind its debt and paid its bills on time. Rating agencies are already discussing lowering our credit rating. Which will undoubtedly roil the world financial markets.
Where Do We Stand Today?
The ramifications above are speculation at this point. It is obvious the U.S. is spending more than it makes and something needs to change. As citizens, small business owners and family members, it is our civic responsibility to stay educated on what is happening in order to make responsible decisions.
As business owners or prospective business owners, consider business ideas that are well suited for tough economic times and ways you can protect your existing business by reviewing your funding options and recession-proofing your business.
