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What We're Expecting When the Government Defaults on its Debt

NEW YORK ( TheStreet) -- Americans looking ahead at the financial effects of debt default stemming from the government shutdown aren't very happy at what they see.

A survey out Tuesday from Information Resources, a Chicago data services company, shows that an overwhelming majority of Americans (85%) are aware of the shutdown and of the potential U.S. government debt crisis economists expect to start Thursday if no deal is reached.

"Consumers have been locked in a prolonged game of economic dodgeball, with one challenge after another coming right at them," says Susan Viamari, the editor of IRI Times & Trends, which published the survey. "The government shutdown and debt ceiling crisis are just more hurdles, and the growing uncertainty really has consumers worried and hunkering down."

Here's a snapshot of some expected effects for certain demographics:

Low-income households: The study says low-income households (defined as families or individuals earning $35,000 or less annually) will bear the brunt of any pain from an economic slowdown linked to the shutdown and debt crisis.

That makes sense, as a lingering debt crisis would most likely lead to higher inflation and higher costs of goods and services. It would also lead to higher interest rates, making credit on such things as home loans and car loans more expensive.

Consequently, lower-income American households would be least able to handle higher prices and more robust interest rates.

Millennials: Americans born between 1980 and 1990 -- the so-called millennials --are gloomy as well. According to the IRI study, 54% of millennials say they will be hurt by a financial crisis, compared with 46% of the general population who say the same.

Information Resources doesn't specify why 30-somethings would suffer disproportionately from a lingering shutdown and major debt crisis. But that demographic is mostly likely to be buying big-ticket items such as a new home or be the ones raising families and thus hit hardest by higher grocery store prices. A bigger family food tab is a prime worry these days for Americans, but especially for 54% of U.S families with school-age kids.

The rest of the public: In general, Americans in most financial categories say they expect to be cutting back on trips to restaurants and "favorite stores" in favor of saving to meet monthly expenses. That consumer behavior would further slow the economy, as retailers and small-business owners (think hairstylists, pubs and diners and home contractors) would lose a big chunk of business.

The IRI study says that 64% of U.S. adults expect to cut back on "non-essential" purchases, and 40% say they have already started looking for coupons online.

If the crisis continues into the holiday shopping season, all bets are off, Viamari says

"There are so many balls in the fiscal air that consumer sentiment could easily be tracked not only daily but hourly," she adds. "And if the debt ceiling is extended for six weeks, we could be in for yet another crisis during the crucial holiday shopping season."

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