Recently United States president Barack Obama was quoted saying “get ready for a lengthy fiscal crisis and a weaker economy”. These words have caused ripples effect among economy experts. Raising concern of asking if there is more than what meets the eye in this case. Subsequently, substantial attention from the public and media has been drawn seeking clarification of the perceived elephant in the room. In a nutshell the current developments can be attributed to an increase in taxes and reduction in government spending.
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This resulted to a deficit, with a direct implication that the amount spent by the government exceeds its overall revenue (Sanger 5). The Congressional Budget Office (CBO) warns that the situation could lead to a calm recession leading to increased unemployment among other adverse effects.
These remarks came out at such a strange time when the president was meeting the Congress leaders to discuss the thorny issue of sequestration. Sequestration is an idea aimed at cutting down public expenditure. The expected cut down includes $ 85 billion from now until the end of September this year.
Sources say the plan is expected to continue to $ 1.2 trillion in duration of 10 years (Marsden 2). This news waves a sigh of relief but not for long as it has started receiving counter attacks of criticism. Since its first mention several parties have come out to oppose it, stating it is not feasible and it is unwise move by the White House.
The predicament over sequestration opens a new chapter in a raging political war over US fiscal policy, and now the proverbial fiscal cliff. This stirs the question of whether this will turn out to be another political fiasco or it shall remain to be a focused economic agenda for national development.
According to Forbes Magazine, some economists argue that the cuts, if done correctly, could trim more than 0.5 percent of US yearly growth as the process is aimed to be holistic affecting all government even the Pentagon (Politi 4). In this move more than one million workers in the federal government could end up been furloughed beginning April.
The new secretary of state, Chuck Hagel, says that the Pentagon shall work diligently to find ways and means of ensuring that the enforced trims are well managed. This involves taking measures such as adopting less dramatic strategies especially to key sector such as the impact of sequestration on national security. Previously his predecessor, Leon Panetta, was quoted on Fortune Magazine warning that these cuts could result into catastrophe and could lead the US to become a “second rate” power state.
Categorically stating that US was the most authoritative fighting strength in the world and that the military leadership shall not allow this decision to compromise this hard won victory (Sanger 5). The same sediments were shared by a senior diplomat at the State Department who requested anonymity. He said “the failure to address the long-term debt shortcoming would force us to twirl our backs on the Middle East and cut our sails on the fresh attention on Asia”
In early January last year, a deal was settled, the fiscal cliff. The republicans agreed to increase income tax rates on earnings such as household raising more than US dollar 450,000 per year. However this arrangement shall not counter any new income for deficit decrease.
Taking the discussion to a different level, the Republican Speaker in the House of Representatives, Mr. John Boehner, believes that the discussion about revenue is over. And it is now about the spending challenge in Washington. Now the congress needs to beat the March 27 deadline to renew government funding. This funding is really crucial because its absence shall lead to partial shutdown to agencies depending on the federal government (Politi 3).
However these are details, what is more vital is for the White House and Congress leaders to read from the same script concerning methodology of avoiding any budget disruptions or any form of budget crisis.
Marsden, William. “United States Latest crisis is an odd way to run a government.” New York Times 23 Jan. 2013: 20-1. Print.
Politi, James. “Obama warns of long fiscal crisis.” Forbes 2 Feb. 2013: 12-1. Print.
Sanger, David. “Fiscal Deal Fails to Allay Doubts on U.S Global Power.” Fortunes 3 March. 2013: 8-1. Print.