07/20/2011 - Failure to raise the federal debt ceiling could cripple state and city capital projects across the country, including wiping out funding for building schools and roads, according to a report on Wednesday.

The study, by the non-partisan Pew Center on the States, warns that a federal default will have spillover effect on other municipalities’ creditworthiness, noting that a downgrade of the U.S. credit rating will likely be immediately followed by downgrades for some state and local governments. That would make it harder for those municipalities to finance capital projects like building schools and roads, the report said.

Inaction by federal government would, in effect, call into question the creditworthiness of all government bonds, which could have long-term impacts on local economies, Kil Huh, one of the authors of the report, told POLITICO.

Read the full article at politico.com.