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Debt Ceiling Debate Becoming A Dangerous Game

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File Photo (Photo by Chung Sung-Jun/Getty Images)

File Photo (Photo by Chung Sung-Jun/Getty Images)

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CHICAGO (CBS) – Republicans and Democrats in Washington remained far apart on a deal to increase the federal debt ceiling and Wall Street is really worried, chalking up the biggest losses in nearly a year.

U.S. House Speaker John Boehner is reworking the GOP plan to deal with the country’s escalating debt and some conservative Republicans who opposed the original plan seem to be supporting the rewrite.

But Democrats are still opposed to the House GOP plans, favoring a longer-term deal.

The stalemate is shaking financial markets, with stocks trading lower all day on Wednesday, then plunging on news that the economy slowed this summer.

The Dow Jones lost close to 199 points, the NASDAQ dropped 75 and the S&P 500 lost 27.

As CBS 2’s Vince Gerasole reports, the debt impasse could hit consumers and the state of Illinois in the pocketbook.

Economists say the impasse in Washington is turning into a dangerous chess game.

“I’m concerned we are really playing with fire here,” said Aldolfo Laurenti, an economist with Mesirow Financial. “First thing you will see is a jump in interest rates for everyone – for mortgages, car loans, credit cards, personal debt – everything will become more expensive.”

And in a distressed home market, brokers working to close home loans are hustling.

“It’s putting a lot of pressure on us. It’s making us concerned for our clients,” said Daniel Chookasian, a broker with Baytree National Bank & Trust. “I think many of the consumers pretend like it’s not going to affect them and we try to work in such a way that it won’t affect them by doing our job up front.”

Brokers are rushing to lock in lower interest rates before they rise, as well as procure documents for those scheduled to close – in case the impasse leads to the closure of certain government offices.

“We’re pushing to get these prior to that potential date, so that we’re not running into situations where we can’t close,” Chookasian said.

If Washington’s credit rating is downgraded, the ripple effects stand to push down Illinois’ credit rating as well,

In essence, Illinois would have to pay higher interest rates on its bonds – hundreds of millions of dollars the state warns would come from programs meant to educate students or ensure public safety.

The state could also see a delay in federal dollars meant for health care programs like Medicaid, a worry to those who rely on it, like Humboldt Park resident Arthur Ray.

“I think I’d be pretty much in trouble,” Ray said.

Fueling your car could cost more too, as a lower-valued dollar would make imports like oil more expensive.

“If no agreement will be found, I think some of these consequences will be long term and it will be really damaging for our economy,” Laurenti said.

The nation is clearly approaching a breaking point in the debt ceiling debate. The markets had been relatively stable during the impasse, until Wednesday.

If something isn’t worked out by the Aug. 2 deadline, economists say significant jumps in gas prices or what we pay on credit card interest could occur virtually overnight.

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