The debate over the United States national debt limit continues to rage on as both parties fight to structure a deal to reconcile the current debt ceiling which, if not raised by August 2nd, could result in a default on the federal debt.  Should such an event occur, the ramifications could be globally drastic.  U.S. debt is generally regarded as the benchmark for default safety, with other bond’s risk often measured versus the Treasury benchmark.  A default could therefore result not only in a downgrade of national debt and increased bond interest rates, but also a fundamental shift in the world’s perception of U.S. debt as a safe haven in times of crisis.  Given the far-reaching implications of such a default, Congress remains frantic in their search for a mutually agreeable bi-party solution.  Tuesday, the GOP majority House rejected Democrats’ proposal for an outright limit increase with no stipulations on government spending or policy.  Republicans, meanwhile insist on a bill which requires any increase in federal debt to be matched and offset by a reduction in federal spending and House speaker John Boehner reportedly received a letter today signed by 150 leading economists supporting this plan.  Boehner noted that integral to the GOP proposal is the idea that any further increase in the national debt issuance without spending reductions will crowd out “private sector job creation in America” and will continue to perpetuate an unsustainable cycle of debt-funded spending.

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