The United States government is just seven days away from defaulting on its financial obligations with discussions in the legislature still unfolding. According to the US Treasury, raising the debt limit of the US Government is absolutely necessary in order to meet legal obligations such as debt repayments, social security benefits, military salaries and tax refunds, among other payments:
“Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations – an unprecedented event in American history….
“…Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents.”
Republicans have called for reduced government spending has led to calls On Monday 25th July, President Barack Obama addressed the nation to explain his view of the problem:
“For the last decade, we’ve spent more money than we take in. In the year 2000, the government had a budget surplus. But instead of using it to pay off our debt, the money was spent on trillions of dollars in new tax cuts, while two wars and an expensive prescription drug program were simply added to our nation’s credit card.
“As a result, the deficit was on track to top $1 trillion the year I took office. To make matters worse, the recession meant that there was less money coming in, and it required us to spend even more -– on tax cuts for middle-class families to spur the economy; on unemployment insurance; on aid to states so we could prevent more teachers and firefighters and police officers from being laid off. These emergency steps also added to the deficit.”
The President went on to characterise the failed deal with the Republicans as a choice between painful-yet-sustainable cuts and a cuts-only approach ” that doesn’t ask the wealthiest Americans or biggest corporations to contribute anything at all”. He also criticised proposals to agree only to a temporary six-month increase in the deficit, saying that to do so would further risk the credit rating of America and only prolong the political stalemate.
The President took politicians to task for failing to compromise and invited voters to pressure their representatives to agree to a compromise deal. Invoking the lessons of history and the legacy of American co-operation between viewpoints, Mr Obama told America to pull itself together and avert a crisis which is only one week away from maturing into the first US default.