Democrats vs Republicans

"Landep News"

Democrats vs Republicans

Budget talks between the President Barrack Obama and top Republican Representatives will enter a critical phase during this weekend. The Republicans have to figure out what their bottom line demands are and make a decision.

All the discussions are aimed on that important deal that is suppose to slash that long term deficit. The Republicans claim that a deal is needed in order to increase the 14.3 trillion debt limit.

The Treasury Department has issued a massive warning to the Congress. They need to make a decision in order to raise the debt limit until August 2. If not, the US will default on their debt. This will trigger considerable economic consequences and even another recession.

The federal budget deficit will be expected to hit somewhere around 1.4 trillion dollars this year and should stabilize around 1 trillion dollar range for the next couple of years. The federal debt representes the total amount of borrows, the government has made. In total, the US government reaches around 125 billion dollars per month.

Are they even close to striking a deal?

The White House and both sides, Republicans and Democrats are going at it since May in order to establish a deal that will make possible substantial budget savings, so that US can successfully increase its debt limit, but there have been loads of obstacles, especially related to taxes.

The big problem is that Democrats and Republicans have opposed ideas. On one hand Republicans will sustain any idea that might cut long term deficit, no matter whether it involves billions or trillions of dollars, as long as the money com form cutting spending alone. Democrats cannot agree with that and came up with another solution. They suggest a combination of spending cuts and revenue increasing. This can be achieved through tax hikes, closing loopholes or even both, if necessary. But how many taxes can we pay?

The negotiations came to an abrupt halt when the Republicans crossed over the Democrats’ demands, when the Democrats suggested that increased revenues should also become part of the deal. Yet still, there was some significant progress during those sessions as almost 1 trillion dollars in savings was identified.

Despite the absence of a decision to this very day, the market is calm. How can it be calm? Of course this may be the calm before the storm if a decision is not made until August 2^nd. Three separate credit rating agencies stated that AAA credit rating would be removed from the U.S. if no deal appears soon.

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