With Democrats wanting to secure social services and Republicans demanding a cut, cap, and balance, as well as a revenue increase; No compromises with an appending deadline leaves Washington in a paralyzing position to compose a spending budget and an expansion of the national debt before the country encounters a potential Depression panic.
Amid the woes of an August 2 deadline to pass a proposal to raise the debt capsule, Capitol Hill has yet to collaborate in an agreement with both parties to fund the federal government before the country witnesses an unprecedented use of obligations and bonds to fund itself. Federal services such as veteran’s affairs programs, IRS refunds, federal salaries, and a continuing list, wouldn’t fall under the daily tax revenue of $172.4 billion that would be necessary to fund the government to be fully operational. However, an underlining deficit of $134.3 billion prevents this from taking place if such deal hasn’t been met.
Many members from both parties have established an adjective plan to either cut and/ or cap America’s domestic spending on certain appropriations in to reach the common objective of creating a balanced budget. Though many Americans are in livid opposition towards these occurrences, John Boehner (R-OH) in a July 25 address plans to continue to make such juristic cuts with a House Republican initiative referred to as the “Cut, Cap, and Balance Act”. This act, sponsored by Jason Chaffetz (R-UT) amends to the Congressional Budget Act of 1974 (CBA),which institutes a discretionary spending limit for the fiscal year of 2012 as $1 trillion in new a new budget authority, and $1.2 in outlays. The veneering logistics of this proposal ascend the ceiling by $2.5 trillion, however camouflaging the cutting $111 billion in fiscal year 2012, cap GDP spending by %18, and social services cuts. This bill is projected to be repudiated by the Democratic Senate and the president has redundantly threatened to veto this bill.
President Obama, previously before the speaker’s address, said that his proposal would make revenue increases, omit tax breaks to the top %2 of the wealthiest Americans, and cut Washington’s domestic spending while creating jobs. This “Grand plan” is projected to save $4 trillion over the next ten years.
Contraire to the president, the speaker recently released a proposal that would cut $850 billion over ten years (according to a recent CBO report on July 26) and allow the debt ceiling to be raised in two phases; 1) would raise the debt ceiling through 2011. 2) A second expansion upon recommendations from a congressional commission. This would empower the speaker and House Republicans to control any expansion offset from democratic votes as a minority before it would reach the senate.
As animosity and tensions vigorously accolade the halls of Washington’s Senate and House office complexes, internal party demagoguery has nearly separated the GOP. Senators McConnell and Reid have proposed to the congress a bargain referred to as “Plan B.” This plan would not affect entitlement programs and continue the $2.5 trillion ceiling increase; however, would be raised in increments of three. Some siding republicans are being despised by who are for the Cut, Cap, and Balance Act. With disputing each other in both plans, small subliminal proposals have been presented such as the Gang of Six proposal, a group of bi-partisan senators of both parties, which cuts as much as $2 trillion for a ten year timeframe. Many lawmakers are looking at Plan B as “Plan A” due to the stability of policy it; with the creators not changing anything substantial that would reverse the objective itself.
The woes of a national default would abruptly avert a recovering economy nationally and internationally. When you contrast the economy declination from Japan’s weather disaster on impacts on Wall Street, Japan resulted in a global economic downgrade, not seen since two years prior, with companies such as; Toyota negative %6, Sony negative more than %5, and Mitsubishi Financial down %4; all as a result of the halt of production industry. Now compare that to the country’s potential default circumstance. If we cut production with government funding and minimizing our AAA credit rating, the world market will see daunting bear market.
Why would the World market be impacted by U.S. deficiency? The United States has holdings from other nations and big bank institutions. The U.S. Treasury holds $1.6 trillion while countries such as China hold nearly $1.6 trillion which accounts for more than a quarter of all foreign holdings. For the top three banks which include Bank of America of $332 billion, J.P. Morgan of $194 billion, and Citigroup of $191 billion which totals to %45 of all commercial banks. With those investors international and national, bonds and holdings would plummet in a depreciating value causing the American dollar to lose tremendous value.
To avert choking the country by its own bonds and entitlements by the neck, there must be some agreement by both parties to raise the ceiling by the required $2.2 trillion which would fund the government through the end of this fiscal year, ending September 21. Integration to compose a budget and cuts are necessary to fiscally save dollars on domestic spending which has increased in the recession to prevent a depression. Any more than the required amount to be raised in a reasonable amount would only ensure a cushion for any abrupt incidents.
From bailouts for heavy bankers and auto industries, to citizen stimulus packages, the debt has increased. But in such a recovery epoch as now, it is of the upmost imperativeness that this country must work under a balanced budget and conserve its money. It is unfortunate that we will see increases in revenue and a subtraction from social entitlements; however, the president said that this would help reduce the deficit to result in a long term effort to reconstruct this economy.