Raising the Debt Ceiling

Effects of debt ceiling debate could ripple through states

Nancy Marshall-Genzer Jul 29, 2011
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Raising the Debt Ceiling

Effects of debt ceiling debate could ripple through states

Nancy Marshall-Genzer Jul 29, 2011
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Stacey Vanek Smith: The threat of default looms on Aug. 2, and that economic uncertainty is spreading to the states — like Maryland, which was recently told its Triple-A credit rating might be downgraded.

Nancy Marshall Genzer has more.


Nancy Marshall Genzer: Any of you have a big brother? Remember what it was like to be blamed for something he did?

Nancy Kopp knows how that feels.

Nancy Kopp: Oh well, yeah, it is pretty annoying.

Kopp is the treasurer of Maryland. Her big brother? The federal government. The credit rating agency Moody’s told Kopp that Maryland might be downgraded because its economy is so dependent on federal spending. State income taxes come from the Maryland residents who work for the feds. Many Maryland companies rely on government contracts.

Warren Deschenaux is the state legislature’s chief budget analyst. He says a downgrade would lead to higher borrowing costs.

Warren Deschenaux: It would be another $1 million or so per $100 million of borrowing.

Treasurer Kopp says there’s not much the state can do to prepare for a downgrade. She is building up Maryland’s piggy bank with enough cash on hand to pay the bills for several months — with no new borrowing.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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