Monday, August 1, 2011

U.S. Debt Ceiling




On 27th July, 2011, an article titled "Q. and A. on the Debt Ceiling" was published in New York Times. The same article was published in "The Hindu" on 29th July 2011 titled "A Crash Course in all the things Debt Ceiling - Michael Cooper, Louis Story" 


Today (i.e. 1st August, 2011), U.S. President Barack Obama had announced their deal on debt limit. Even though it is announced, the deal still has to be passed by both the Senate and the House of Representatives. However, it is expected that, the deal will get approved before the deadline (i.e. midnight of Tuesday), beyond which the U.S. Treasury had warned that the federal government would not be able to pay its bills.

The new deal was tied to cut the $14.3 trillion national debt amid of higher public spending. The deal will be implemented in 2 stages. In the First stage of plan, Special Congressional Committee has to find $ 1.5 trillion in savings by the end of December. The Second stage of plan is to cut the public spending by $ 1 trillion over the next decade (i.e. next 10 years). The deal is expected to have certain relief for U.S. economy.

My reflection

Perhaps, this is the best possible debt ceiling deal which U.S. would have struck. There are few question arises over the deal; they are 1) why there is emphasis only on cutting public expenditure and there is no signal or even utterance on taxes? (This is pointed out by some of the senate and house of representative members) 2) why did U.S. took so long to strike this deal (when it is to be without mention of tax), despite the debt crisis had started way back and got further deeper in May, 2011?

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