WASHINGTON (CBSDC/AP) — A Wall Street analyst warned that not raising the debt ceiling or ending the government shutdown any time soon could have dire consequences for the global economy.
Democrats and Republicans are holding firm on their stances as the government shutdown enters its ninth day with seemingly no end in sight. This comes as the Obama administration warns that the U.S. could default on its debt if the debt ceiling doesn’t raise.
Jonathan Corpina, a senior managing partner at Meridian Equity Partners, tells CBS News that the “psyche of the shutdown” has already caused havoc on the markets.
“The longer this goes, the more fear investors and Main Street are going to have. This is something we’ve never experienced before, especially for a period of time like this,” Corpina said. “And it’s quite unsettling for many people. So yes, it’s going to affect our markets but eventually it’s going to start heading our economy and that’s when Main Street and Wall Street start feeling the same effects together.”
Corpina stated that a deal needs to be in place to raise the debt ceiling before the Oct. 17 deadline, despite some Republicans downplaying the debt ceiling warnings.
One of those GOP lawmakers, Mike Pompeo of Kansas, said that it was “simply false” the U.S. will default on its debts if the borrowing limit is not raised because the government still collects revenues even without raising the limit.
“When we start to get to the place where the borrowing capacity is constrained for the federal government, there are real risks to the economy,” Pompeo said. “I do not for one second diminish how real those are. But, having said that, doing nothing guarantees we will default on our debt.”
Corpina said that not raising the debt limit will not only have an economic impact globally, but also a psychological one.
“Just from an economic and psychological point of view, it’s going to have a tremendous effect on our markets. It’s an uncharted area that we’ve never seen before, that we’ve never experienced before,” Corpina told CBS News. “Therefore markets and market participants are not going to know how to react to a situation like that and when you don’t know how to react to a situation like that immediately people pull their chips off the table.”
Corpina added the credit rating of the United States will have to change if the government defaults on its debt.
“From a personality perspective, it’s quite embarrassing these headlines that the rest of the world is reading about the United States of America,” Corpina said. “I think that’s going to be a bigger effect on the longer term progress, the longer term negotiations that we’re going to have with other countries. We’re going lose our power seat.”
President Obama is meeting with House Democrats at the White House Wednesday and will meet with Republican lawmakers this week in an effort to end the shutdown stalemate.
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