How will the debt ceiling/deficit/debt talks pan out?
Summary: The US debt ceiling will be officially reached on August 2nd. On that day no paperwork finagling will be able to save us and we will default on whatever payment we owe that are due. Although some in Republican circles are trying to argue that us defaulting would not be a bad thing, economists worldwide are basically saying it would almost certainly bring down the US credit rating (which has been a perfect score for over 50 years) and could go as far as pushing the planet into another recession, or worse.
The talks between congress and the president are held up on this… Before increasing the debt limit both parties want to make substantial cuts/plans/etc to the budget to bring down future deficits (note that no plan on the table right now would eliminate the deficit and start taking away from the debt, they would simply lower the annual deficit). Republicans have long fought for cuts to social spending, discretionary spending, social security, medicare/medicaid, etc…. cut spending has long been their mantra. Democrats agree that cuts need to take place, but don’t want to place all the burden on the poor and elderly and middle class that the programs being cut support, so they’ve suggested meeting in the middle and raising taxes on the richest, and closing tax loop holes that allow corporations like GE to pay $0 in taxes.
President Obama put on the table last week a plan to cut 4 trillion dollars from the national budget over the next 10 years. For some scope on that, the Healthcare bill that conservatives railed against as being a huge waste of money (nevermind that it was 100 billion cheaper than the plan we had in place) was also a 10 year plan, costing roughly 700 billion. So the cuts Obama proposed would be the equivalent of 5.71 healthcare bills (monetarily speaking). The plan includes huge cuts to discretionary and social spending, smaller cuts to SS and medicare/medicaid (which is also expected to motivate much needed reforms in those programs), and the closing of various tax loop holes and an increase to those making over $250k a year (~5% of the population). It should be noted that the tax increases would take us pretty much back to Clinton era levels (the difference being they’d be slightly higher on the top 5%, and slightly lower for the middle class) Roughly 2.5 trillion would be spending cuts, and roughly 1.5 trillion would be tax fixes/increases.
As it stands, Democrats are upset about even having Social Security and Medicare/Medicaid put on the table (but seem to be willing to go along), and Republicans are outright refusing any tax increases, and adamantly opposing the closing of tax loop holes.
What do you think of Obama’s plan? What would be your plan? How do you want it to play out? How do you expect it to play out?
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