Obama’s Doom Prediction Over Debt Ceiling
11:36pm UK, Monday July 18, 2011
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Weeks of wrangling in Congress has so far failed to produce an agreement to raise the country’s debt ceiling, which is the amount it can legally borrow, when it reaches the $14.3 trillion (£8.89 trillion) limit on August 2.
Economists have warned that default risks plunging the US back into deep recession, raising interest rates and sparking panic in global financial markets.
Two of the three large credit ratings agencies have warned the country’s AAA rating could be at risk if no deal is struck.
But talking on Jeff Randall Live, William A Galston, a former adviser to Bill Clinton and a senior fellow at the Brookings Institution, stated too much is at stake for the US to be granted to default.
“There is a ticking bomb in the middle of the US economy and right now the bomb squad is arguing about how to defuse it,” he said.
“But I find it difficult to believe that in the last analysis the squad is going to grant it to go off.”
In recent years, authority for the increase has been something of a formality, but this time it is caught up in the row over how ideal to cut the crippling US debt and deficit.
Mr Obama, who hosted five straight days of speaks at the White House last week, stated the deal must be done by this Friday so the legislation has time to be put into effect.
Republicans are refusing Democrat demands to end tax breaks for the wealthiest Americans as part of plans to slash $4 trillion (£2.48 trillion) from the debt.
Cuts to social welfare programmes, or entitlements, are also on the table.
Mr Obama said: “We have a chance to stabilise America’s finances for the next 20 years if we are willing to seize the moment.
“It will take a shared sacrifice and a balanced approach.
“If we cannot do the biggest deal possible, let’s still be ambitious.
“Let’s at least get a down-payment on deficit reduction and that we can accomplish without large changes of revenue or significant changes in entitlements, but we can still send a signal that we are serious about this problem.”
Leading senators are working on an emergency ‘plan B’ which would grant the president to raise the debt ceiling without Congressional approval.
But the uncertainty is worrying the markets.
Paul Mendelsohn, chief investment strategist at Windham Financial Services, said: “People are starting to get nervous about what they are seeing out there.
“The news flow dealing with the deficit issues and the political posturing that is taking place is going to be intensive and is really going to drive the markets.”
source : news.sky.com
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Submited at Tuesday, July 19th, 2011 at 12:00 am on Business by samantha
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