Though final negotiations haven’t been voted on, members of Congress are closer to a debt ceiling deal. But experts say the future is still uncertain.
A government default would hit Americans directly in their pockets. Indiana University economist Todd Walker says higher interest rates would be particularly damaging to the economy during a time when the housing market is still very weak.
“If markets think that there’s some uncertainty, then they’re going to demand a risk premium which is going to drive interest rates higher,” Walker said. “The Bloomington housing market hasn’t been all that volatile, the economy here is still subject to interest rates so interest rates are extremely important to the economy and any increase in interest rates.”
This could lead to higher interest payments on credit cards and higher mortgage payments, even for Bloomington residents.
In the long term, entitlement programs including Medicare and Social Security could see cuts. Because federal dollars are used for student loans, Walker says programs like Pell grants might be slashed in favor of more expensive loan payback options.