States Warily Watch Debt-Ceiling Impasse
07/28/2011 - The debt-ceiling debate in Washington is being watched closely in state capitals, as a U.S. default, or a lowering of the country's bond rating, will have a ripple effect in states and communities across the nation.
In states and localities, the sometimes-abstract debate in Washington over the debt ceiling hits closer to home. Although almost every state must balance their budgets, they also rely on borrowing — selling bonds to investors for everything from meeting day-to-day cash-flow needs to funding major capital improvements.
"They borrow to finance long-term projects like infrastructure, road and bridge construction, as well as an upgrade of the telecommunications systems," said Kil Huh, who is with the Pew Center on the States. "These are activities that create jobs—in the long run have multiplier effects. And, essentially, If states need to postpone these in order to get more favorable terms, that's going to have an impact on those communities as well in terms of jobs and recovery."
Already, Huh says, Portland, Ore., postponed a $43 million bond offering for school construction because of uncertainty in the markets. But there is some good news, too.
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- States' Fiscal Health