Walker: Debt Ceiling Crisis Won't Hurt New Canaan

NEW CANAAN, Conn. — Security patrols at the nation’s borders could be dramatically reduced, airports and post offices shuttered and interest rates on credit cards, mortgages, car payments and student loans may skyrocket. Social Security checks for the elderly and disabled could stop.

In Connecticut, the financial services industry in Fairfield County and the insurance industry in Hartford could collapse, creating a “catastrophic domino effect” that would ruin the state’s top credit rating and send unemployment numbers soaring. Those are just some of the possible scenarios if the Aug. 2 deadline for President Obama and Congress to make a deal on the federal debt ceiling fails to materialize, say state officials and Connecticut's Congressional delegation.

 U.S. Rep. Jim Himes, D-4th District, says Congress must find a way to avert a first-ever financial default in the United States, which could impact global, national, state and local economies. “Most people don’t realize the kind of devastating impact this could have on them,” Himes said in a telephone interview Wednesday from Washington, D.C.

“Since it’s never happened before, who knows what the federal government would be able to pay for,” Himes said. “But if we go past Aug. 2 without a deal, there is a real possibility of a credit rating downgrade in the Unites States, which is like a nuclear bomb going off in the financial system.”

But should that bomb go off, New Canaan government is unlikely to be affected. First Selectman Jeb Walker said the town doesn’t depend much on federal aid, so it won’t see any interruptions.

“If they don’t reach an agreement, I’m sure some people in town, especially those in the financial industry, may take large financial hits. But I can’t see anything in that situation that will have a serious effect on the town,” he said.

Finance Director Gary Conrad said New Canaan invests in government-backed securities, and he does not think the nation’s credit rating falling from AAA to AA would affect the town seriously. Rising interest rates might be good for some town investments, but it might have to pay more if it has to bond a project, Conrad said.

Himes blamed the crisis on politics. “The right wing of the Republican Party has driven us to this in its anti-tax fervor,” he said. “With the state of our economy, this would be the worst possible moment imaginable for the Unites States to default.”

U.S. Sen. Richard Blumenthal, D-Conn., agreed. "Raising the debt ceiling is essential, because defaulting would be catastrophic for job growth and our fragile economic recovery, and would dramatically raise interest rates,” Blumenthal said. Obama is supporting Senate Majority Leader Harry Reid’s plan that would trim $2.7 trillion of government spending over 10 years. Ben Barnes, secretary of the state’s Office of Policy and Management, said Connecticut could have problems even if default is avoided. “Defaulting would be a disaster, but I am also deeply concerned about some of the deal being considered,” Barnes said. “It could have a terrible impact on Connecticut if there are cuts to much needed upgrades in transportation, education and the environment.” Himes said he expects a deal to be worked out between the president and Congress as the two sides “work feverishly over the weekend.”

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