Both sides agree default would be bad news for Nevadans

By Karoun Demirjian

Saturday, July 30, 2011 | 2:01 a.m.

It will take a political miracle for Congress to resolve its standoff over the debt limit any earlier than a few hours before the deadline.

Playing it that close to the wire means there’s a real possibility of default.

But even if government is able to maintain its ability to borrow, it doesn’t mean Nevadans won’t experience an economic hangover in the aftermath of the debt deadline.

That’s because there are two chances to get hurt here. The first is a default. The second is a credit downgrade.

Democrats have been warning that if the country goes into a default, that will be the end of Social Security, Medicare, veterans’ benefits, educational grants and every other federal support program that Nevadans rely on.

Republicans have charged that these are just “scare tactics,” and some have banded together to draft legislation that directly refutes the claim by attempting to make it law that in the case of a default, Social Security and Medicare recipients are paid first.

Either way, if the U.S. loses its ability to borrow, it loses more than 40 percent of its ability to pay for anything.

If the Democrats are right, the benefits of Nevada’s almost 400,000 Social Security recipients will be partially to fully on the block. Same goes for the 275,000 Medicare recipients. And 250,000 veterans.

If Republicans are right, in a default we would likely stop paying our foreign debts first — but given that domestic expenditures are larger than our foreign debt, it’s still likely that cuts would come somewhere — perhaps to the 15,526 Nevadans employed by the federal government.

But even if we avoid a default, the country is still in danger of having its credit downgraded, which will cause interest rates to rise. That will make it harder for every Nevadan with a credit card, or an adjustable-rate mortgage, or a car loan, to pay bills.

The fact that Washington is in a standoff shows the two political sides don’t agree about much.

But the fact that Nevada is in trouble? That’s one thing even the bitterest of political opponents can agree on.

“If we can’t come to some resolution, no matter what, Nevadans are going to be hurt ... my constituents are hurting already,” said Shelley Berkley, who voted against House Speaker John Boehner’s debt bill in the House Friday night, but has said she would likely support a plan put forward by Senate Majority Leader Harry Reid.

“Nothing is going to come out good for Nevada if interest rates go up and we don’t pass something by Aug. 2,” said Rep. Dean Heller, who voted against killing the House’s debt bill Friday night, and has said he wouldn’t back Reid’s.