Blissful Belle

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Time is Winding Down: The U.S. Debt Crisis


If you’ve been following the news or just following President Obama on twitter, then you probably already know that the United States is currently facing a major debt crisis.

On May 16, the U.S. government hit the debt ceiling or the amount of money the U.S. is allowed to be in debt without losing credit, which is currently set at $14.294 trillion. This has left the government with two options: the debt either has to be significantly lowered somehow or the debt limit must be increased.

Seems simple, right? Not really.

Many members of Congress will not pass a bill to raise the debt ceiling (which has been done frequently under previous administrations, including seven times under President George W. Bush), unless significant spending cuts are made to curb the overall debt. Essentially, the battle in Congress has turned into a series of different spending cuts from various areas, such as Medicare, Medicaid, Social Security and many more.

Despite many efforts to solve the crisis, the U.S. Congress has split along party lines and compromise seems to be nothing but a word floating around with no action taken. If a federal budget deal solving the debt crisis is not struck by August 2, the U.S. is at risk of defaulting on its’ financial obligations.

So then what options does the Obama administration have?

graphic provided by BBC.

Wondering how all of this political mumbo jumbo might affect you?

If Congress fails to reach an agreement on this issue, the country will have to default on its’ debts, which would mean that the U.S. would slip back into a recession. Unemployment rates would rise, businesses would struggle to survive, social security checks would become nonexistent to those who survive off of them, government employees and members of the armed forces would fail to receive the money they are owed and the nation’s debt would increase causing the U.S. to lose all creditability within the global market.

The negative possibilities of defaulting are endless, which is why it is imperative that Congress find a solution to the debt crisis in the next three days.

Within the last few months, particularly within this last week, bills have been proposed to both the House of Representatives and the Senate, but whenever they are put up to a vote, the bills are immediately voted down because one party wants this cut and the other party doesn’t and vice versa.

Here are a two of the most recent bills that Congress has tried, and failed to pass (These figures were provided by CNNMoney and The Washington Post):

  1. The Boehner Bill – proposed by House Speaker John Boehner (R).
  • Caps on discretionary spending (the money Washington uses to pay for defense and all manner of government agencies and programs) and
  • Reduce overall spending by $917 billion over 10 years
  • Two-stage increase in the debt ceiling, the first: $900 billion (which might cover the Treasury Department’s borrowing needs into early 2012), and the second: $1.6 trillion (which might cover borrowing needs past the presidential elections into 2013).
  • Overall, it would increase the debt ceiling by $2.5 trillion in exchange for $2.7 trillion in debt reduction
  1. The Reid Bill – proposed by Senate Majority Leader Harry Reid (D).
  • Caps on discretionary spending (the money Washington uses to pay for defense and all manner of government agencies and programs).
  • Reduce overall spending y $927 billion over 10 years
  • Would set an immediate procedure to raise the debt ceiling by $416 billion and two more times after than for a total debt ceiling increase of $2.4 trillion, in exchange for $2.2 trillion in debt reduction
  • A joint committee would be charged with proposing ways to reduce annual deficits to 3% or less of gross domestic product

The first two points of each bill are very similar, but the points after that for both bills are what caused too much partisan disapproval. To some, Boehner’s bill was too extreme conservatively, while Reid’s bill was not conservative enough.

In his speech on Monday (July 25) and again in another speech Saturday (July 30), President Obama pressed for the need to pass a bill that speaks for the best interest of the American people, rather than a bill that sides with partisan interests.

On July 29, President Obama rallied on Twitter in an effort to muster support among the American people for the end of this debate between uncompromising political leaders. He asked the citizens of each state to contact their representatives and tell them to support an end to this debt crisis and pass a bill that works for everyone.

While representatives in the House and the Senate are still debating the issues, many fear the imminent idea of default. For the next three days congressional leaders must find a way to settle their differences and pass a bill that will bring this debt crisis to an end.

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This entry was posted on July 31, 2011 by in News, Savvy Belle and tagged , , , , .
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