According to the Republican and Majority Leader of the US House of Representatives, Eric Cantor, President Obama abruptly walked out of talks yesterday aimed at resolving the country’s debt ceiling issue.
“He shoved back and said ‘I’ll see you tomorrow’ and walked out.” Said Cantor.
Under the Second Liberty Bond Act of 1917 congress sets the aggregate limit of debt that the US can issue in the form of bonds. The last time this was set was in Feb 2010 when it was increased to $14.294 trillion.
The US reportedly hit this ceiling in May this year and if this limit is not raised by August 2nd, just a couple of weeks away, then the US is in danger of running out of money and even defaulting on its debt.
Closer to the interests of each US citizen is the danger that public sector wages won’t be paid or that the government may use ‘extraordinary measures’ to keep the US afloat such as federal employee payroll deductions.
This was why the credit agency Moody’s has put the US on negative watch as well as even threatening to downgrade its debt from the top-notch AAA status.
The reason that congress won’t just vote to up the limit is because the Democrats and Republicans want their own way before they agree to it.
The Republicans want huge spending cuts of about $2.4 trillion over ten years. But Obama’s Democrats wants an even larger $4 trillion cuts over ten years as well as higher taxes. The two sides cannot agree to a compromise ….. yet.
Each side appears to be going to the brink to force their issue.
The American population is obviously wary of debt as a recent Gallup poll had its citizens voting by about 2 to 1 against raising the limit at all.
But without a raised limit the whole world’s economy is at peril. So how much farther can the Republican/Democrat grandstanding and brinkmanship go on?