Time Is Running Out
The U.S. Senate and House of Representatives have until the 2nd of August to come up with a deal to extend U.S. debt ceiling beyond $14.3 trillion and avoid the very real possibility of default.
President Obama, the Republicans in the House of Representatives and the Democrats in the Senate have been arguing at length over how to make $3 to $4 trillion in savings over the next ten years. So far the Republicans have ruled out supporting Obama’s tax increases, with Reuters suggesting that revenue is the main sticking point between the two sides.
Much like the crisis economies of the Euro zone, the United States will be on the brink of default in just over a week. This is scary stuff. Alister Bull and Richard Cowan at Reuters remark:
With the world’s biggest economy set to run out of money to pay all of its bills on August 2, the window was closing fast for a “grand bargain” of spending cuts and tax increases in exchange for Congress raising the debt ceiling.
Financial markets are growing more edgy and U.S. banks and businesses are making contingency plans for the possibility of a debt default that would drive up interest rates, sink the dollar and ripple through economies around the world.
If the United States goes to the wall, it will be for the first time in its history and will also mean the loss of its prized triple A credit rating, with far reaching consequences for the world economy.
The US, like so many Western economies, has run up vast debts in past decades, due in no small part to the ever increasing financial burden of a bloated welfare state. It is not as though this problem has happened overnight either. George Bush, that supposedly evil, nasty, right-wing zealot was a prolific borrower and spender at the expense of the American taxpayer. Likewise, Barack Obama, who has been in office for a number of years now, has had plenty of time to get to grips with U.S. domestic spending – and yet here we are, only weeks away from a massive default and suddenly there’s a mad panic to rearrange the deckchairs on the Titanic.
