Expert Says Lawmakers Will Reach Deal Over Debt Crisis

Time is running out.

That was the message from President Barack Obama on Friday morning, as he urged Congress to act before Tuesday’s deadline to raise the federal borrowing limit or face unprecedented default on its debt.

The Republican-controlled House passed legislation Friday night to prevent a threatened government default and sent it to certain defeat in the Senate.

The rhetoric and fog of information from Washington can be overwhelming.

Tim Roth, a University of Texas at El Paso economics professor, and former senior economist for Congress said that all this debt ceiling talk is pretty simple: “No budget’s been passed and spending is out of control.”

But with the economy still struggling, this year’s process is even more harrowing.

“This is a frightening time in Washington, for the nation,” Roth said.

For perspective, Roth said Americans must look at the gross federal debt as a percentage. “In 1995 it was 67 percent; properly calculated by this year it’s going to be 102.6. The Greek government fell when its government debt reached 103 percent.”

And as for the standoff in Washington, Roth said much of the finger-pointing and inability to compromise can be traced back to redistricting lines or the gerrymandering in which every state takes part.

“We’ve now generated congressional districts hard Democrat, hard Republican,” Roth said.

Ultimately, Roth believes people shouldn’t panic because a deal will be reached.

“They will agree even though they disagree about all of the fundamentals because they’re scared,” said Roth.

Plus, Roth said, no one wants to risk weakening the financial markets or causing interest rates to rise, at least not yet.

“Even if the compromise is not reached by Aug. 2, the federal government will not fail to pay interest on the existing debt,” said Roth.

So when lawmakers say the checks won’t go out next week, “that doesn’t mean Social Security, Medicare, Medicaid, veterans it will not be the military, but it’s going to be those special interests, those corporate entities,” he said.

Many businesses and organizations that receive what Roth calls “corporate welfare,” such as contractors and utilities, and that’s how the effect will trickle down to you.

While Roth said he doesn’t expect major fallout from the current debt ceiling deal, though Friday’s stock market declined for a sixth-straight day.