How could the debt crisis affect your finances?

July 26, 2011 (CHICAGO)

Despite President Obama's call Monday night for compromise, Democrats and Republicans are pushing forward with competing plans. One won't pass the House and the other one won't pass the Senate. But both raise the debt ceiling, cut more than $1 trillion in spending and do not raise taxes.

Phone calls have been flooding into congressional offices with Americans making their voices heard. One senator's office reported that half the callers favor the Senate plan and half the House plan.

Still, a White House spokesperson says he expects some type of deal to get approved.

"Time is running out. So while we remain confident...we also understand some of the anxiety out there, because we are pushing this to the last minute, and that should not be the case. But in the end, we believe Congress will act appropriately," said Jay Carney, White House press secretary.

Currently, the lack of agreement is difficult for some to watch -- especially when individuals are already making tough decisions with their finances.

Two months ago, Tom Zaworski went to work. At the end of the day he was laid off with no severance. For the first time in 25 years he's unemployed. He came to the Career Place in Barrington Tuesday for help with the job search.

"I'm just about out of money and will have to go into the retirement fund in the next few weeks," said Zaworski.

Zaworski, a CPA, has been carefully monitoring his finances. His concern about retirement is only heightened as politicians debate ways to avert a debt ceiling crisis.

"The economy is bad and the rest of us are suffering. They won't stop playing their games until the eleventh hour. And frankly it just irks me," he said.

Zaworski hopes politicians remember those struggling and find common ground.

If the United States does not raise the debt ceiling in order to make its payments, the nation's credit rating would likely be downgraded, raising the interest rates for the nation and everything else, including mortgages, cars and credit cards.

"If the government handles the crisis properly, it can minimize the impact," said Houston Stokes, head of the Economics Department at University of Illinois Chicago.

Stokes hopes the politicians will find ways to compromise on taxes and expenditures to reduce volatility in the market.

"Get rid of some of these loopholes that were slipped in and do some cutting on the expenditures and bring them together and try to calm the whole system," he said.

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