WASHINGTON, DC -- With one week remaining before the United States hits an August 2nd deadline when the government runs out of money to pay its bills unless Congress acts, U.S. Senator Jack Reed (D-RI) today warned that the Republican-created impasse on the debt ceiling could have severe consequences for Rhode Island. 

If the U.S. is forced to default on its debt repayments for the first time in history, the ripple effect would raise interest rates on families, businesses, and governments and make everything from mortgages to car loans to other goods and services more expensive.  In a worst case scenario it could also lead to businesses freezing new hires or even laying off workers and cause some cities and town to raise taxes.

Reed stated: “A federal default would be a self-inflicted wound that could exacerbate Rhode Island’s fiscal and unemployment woes at a time when the state is still coping with the recession.  It could have a profound impact on people’s retirement savings and result in higher interest rates for families, businesses, and local governments.  It would also increase the deficit itself because it is estimated that every 1% increase in interest rates will raise the deficit by $1.3 trillion over ten years.  So simply put, we cannot afford to default – it’s bad for jobs and it’s bad for taxpayers.  Democrats have offered a plan that prevents default, gives businesses certainty, cuts upwards of $2.2 trillion, and offers a bipartisan way forward to reduce the deficit even more.  I urge its swift passage.”

-end-