Archives for posts with tag: national debt

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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Today, President Obama revealed his preliminary plan for debt-reduction which he believes will cut approximately $4 trillion off of the deficit within 12 years.  CNN outlines the tenets of his strategy, which combines mainly non-security discretionary spending cuts and tax revisions to reform and restructure how the federal government allocates its resources.  Tax wise, President Obama highlighted that he will allow the Bush-era tax cuts to expire yet plans to make this fact negligible by reforming the tax code in a way which will remove virtually all tax breaks in an effort to lower the overall rate.  The President also made sure to note that his plan will result in $3 of spending cuts for each $1 increase in tax revenue.  Additionally, the plan calls for greater oversight and control of government allocations to health care costs, which continue to skyrocket.  Overall, the plan appears to show the seriousness with which President Obama views the current national deficit and his methodology suggests that he will rely highly on his Bowles-Simpson Commission recommendations for inspiration.

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