Obama plans to tackle US $4 trillion debt crisis
President Obama will today set out his plans to tackle America’s growing debt crisis.
The US government’s accumulated overdraft is rapidly approaching the ceiling set by congress of $14.294trn (£8.79trn).
Politicians will have to agree to raise the ceiling even further, to avoid the world’s largest economy defaulting on loans and potentially triggering an international currency crisis.
The process of allowing more debt to accumulate is nothing new: Congress has voted to increase the debt ceiling 74 times in the last 50 years and 10 times in the last 10.
But this year, the politics are much more tricky.
In last November’s mid-term elections, voter concern about the scale of government spending helped the Republicans regain control of the House of Representatives.
Many of the new influx of Congressmen and women, many of whom identify with the Tea Party movement, will be unwilling to increase the ceiling, despite dire predictions from the White House about the consequences.
Michelle Bachmann, a potential contender for the party’s Presidential nomination, threw down the gauntlet.
“We are not looking to shut the government down, no-one benefits,” she told CBS News.
“But at the same time we are not looking at wanting to continually raise the debt ceiling.”
The debate about the national debt comes as Congress prepares to vote on the last-minute deal struck last week to keep the federal government funded until September.
The opening salvos have also been fired in the debate over the budget for 2012.
Republicans have already outlined their plans for the latter, which they claim would shave $4.4trn (£2.7trn) from the deficit over the next decade.
The President will have to tread a careful line in his speech: outlining broad principles while not tying the hands of negotiators.
His spokesman, Jay Carney, said the President would deliver his “vision”, and warned of “a global economic calamity” if Congress failed to raise the ceiling.
The White House favours a balanced approach which will not only involve spending cuts (including looking at large entitlement programmes such as the healthcare schemes Medicare and Medicaid) but also tax cuts for America’s richest.
That was the conclusion of the Bowles-Simpson bi-partisan debt commission established by President Obama, and chimes with the rumoured compromise agreed by the so-called ‘Gang of Six’ senators, trying to find common ground between the two parties.
It still won’t be easy to reach agreement, though.
Most Republicans will fight any attempt to increase the tax burden, which they say is necessary to keep the economic recovery on track.
Source: Sky News