Tensions rise on Capitol Hill as America runs out of money
By 2 August the US must raise the legal limit on its $14.3 trillion debt or face dire consequences, and Republicans and Democrats have been locked in battle on Capitol Hill. With the crunch deadline approaching, Obama hit out at Republicans last week, saying they favoured corporate jet owners over children and the elderly. Those high-flying fat cats got six mentions in a speech that set out the president's combative stance
That dire consequence is a debt default. You know, like Greece.
UPDATE: As Debt Talks Intensify, Republicans Shift Further Right
- Republicans won't support tax increases as part of deal to raise borrowing limit
- Signs mount that House Republicans who had been willing to compromise on spending may now be less willing
- Democtratic Rep. Welch wants House speaker to schedule vote on raising the debt ceiling without conditions.
WASHINGTON (Dow Jones)--Republicans dug in their heels Monday and said that they wouldn't support tax increases as part of a deal to raise the U.S. borrowing limit, amid signs that the caucus is shifting further to the right just weeks before the country's ability to finance its deficit expires.
After Obama's speech, Rep. Michele Bachmann (R., Minn.), a presidential contender who is currently at the top of the polls in Iowa, issued a statement reiterating that she wouldn't vote to raise the debt ceiling. She said Obama "has wrongly assumed that everyone agrees that we need to raise the debt ceiling... I disagree."
Rep. Peter Welch (D., Vt.) said House Republicans appeared to moving farther from a compromise with Democrats instead of closer. "What you're seeing in the Republican caucus is first, no deal that includes revenues; then the fallback position is the cuts aren't deep enough; and then the fallback position is we shouldn't raise the debt ceiling. Michele Bachmann is sort of leading the parade. They're playing dangerous politics and they're looking over their shoulder at a potential tea party challenge if they vote to raise the debt ceiling."
Welch said the House Speaker should schedule a vote on raising the debt ceiling without conditions.
"It would be political malpractice to deny us the chance to vote up or down on an increase in the debt ceiling to avoid a catastrophic default," Welch said.
Boehner already did hold such a vote at the end of May. The measure overwhelmingly failed, 318-97.
Whats wrong with America's wider economy? Mohamed El-Erian, CEO of PIMCO (Numero Uno in Bond Management, Funds and Investment) wrote an excellent article last week. How America can avoid another Lehman.
First, and nearly three years after the global financial crisis, the US housing market is still unable to find a firm enough footing. This undermines confidence and limits labour mobility.
Second, joblessness remains worrisomely high, and to make things even worse, is increasingly structural in nature. Witness the 9 per cent unemployment rate, declining labour participation and an alarming 24 per cent unemployment rate among 16-19-year-olds and a 40 per cent rate for African-Americans.
Third, credit is yet to flow properly in the economy. With bank lending still hampered, it is small companies and poorer households that suffer the most.
Fourth, there is a problem of debt and leverage. Coming off a ‘great age’ of debt and credit-entitlement that went way too far, balance sheet rehabilitation has been uneven and generally insufficient. Yes, some sectors, led by multinational companies, have recovered strongly. But far too many in the private sector are still over-indebted. Meanwhile, public balance sheets, be they of the Federal Reserve or the fiscal agencies, are contaminated to such an extent that they now constitute a source of medium-term uncertainty.