YORKTOWN, N.Y. While 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 said 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.
However, if those days do pass without any resolution, Hayworth said the local governments and organizations in Westchester County will most likely 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, Yorktown Town Supervisor Susan Siegel said it was hard to tell exactly how the crisis would affect local town boards.
We get some federal money, but not a lot. Its hard to tell what would trickle down from the state level and affect us, she said.
Yorktown Comptroller Joan Goldberg echoed Siegels assessment that Yorktown doesnt receive a lot of federal money, and said no current projects would be stopped if the ceiling is not raised.
Yorktown is on solid footing here, she said. We dont have any federal projects right now that arent already funded.
Ball did stress however that although the project may not halt projects going on at the local municipality level, should the debt ceiling not increase and Albany did not have the money it needed, that could also be handed down to the towns.
It would be an increase in responsibility for the town boards. The town would have to make up the money if they have a large cut in the federal revenue, Ball said. If theres a large cut, the state would be forced to shift some of the burden to a local government.
While the burden could be shifted to the local governments, Ball said the impact not raising the ceiling could have on New York comes from the effect it will have on the economy as well.
If it were to come to the Armageddon that is being threatened, since New York State is so tightly linked to Wall Street, it would have huge effects on state revenue which would result in huge funding cuts and burdens for local governments, he said.
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