Whereas U.S. elections 2012 ended in Obama’s second term of office, global financial crisis together with tax cuts and two unpaid-for wars resulted in $16 trillion debt for U.S. government. Now President Obama and Republican leaders have to reach an agreement on fiscal policy as the calls to cover the deficit are deafening.
With only 50 days left until the end of the year, The Obama administration and congressional leaders still have a “fiscal cliff” – the moment in January 2013 when – era tax cuts expire and automatic cuts to defense and social programs take effect – coming closer.
Analysts say, U.S. policy makers used to avoid tough decision while the national debt was rising rapidly. This time delaying the pain will only undermine the economic recovery of the country and the world’s confidence in American leadership.
News reports that Barack Obama and congressional leaders will sit down to talks in the White House on Friday to negotiate a deal. There was plenty of talk about the issues that will be on the table in the Capitol this week.
“Now, in exchange for paying off a bit of that debt by returning some of the tax rates to their previous levels, Democrats have offered, in a series of high-profile negotiations, to slash trillions in spending, much of it hitting the elderly, the poor and the middle class,” The Huffington Post reports.
Barack Obama, in his turn, tries to avoid this scenario by proposing a “grand bargain” that would cut the deficit by $4 trillion over a decade, relying on a 3-to-1 mix of spending cuts and revenue increases.
The sources claims that during the negotiations lawmakers on both sides will touch upon Social Security, Medicare, Medicaid and other social programs, which mainly involve veterans, elderly, retiring federal workers and home health care workers.
They say, reducing non-entitlement health care spending is likely to give a big chunk of savings. Republicans assert that serious structural reforms are necessary to the Medicare program itself.
Moreover, they proposed to raise the eligibility age from 65 to 67 and to introduce a voucher system. However, Democrats are not ready to large-scale changes.
Another stumbling block in the discussion will be, in all likelihood, tax cut, as long as Democrats keep insisting that any deal must include tax increases and GOP refuses to give on increasing taxes on the wealthy.
However, tax cuts first impose under Republican former President GeorgeBush are due to expire on December 31 for all Americans unless Congress makes a proper decision.
According to The Independent, Washington can “tell people to work longer, pay higher taxes and expect less in retirement”.
The parties have a few more days to prepare for the talks, which will show whether the election results affected the relations between the sides or not.
Democrats and Republican have veritable ideological objections to each other’s suggestions, but the only way forward is to embrace compromise.
It goes without saying that if handling the financial cliff fails, the USA will not only run the risk of credit rating downgrade, but will also push the economy back into slump.