A deal has been made in Washington in regards to the debt ceiling. As I expected, Congress has passed a bill in which it will allow raising the debt ceiling. Something I felt that shouldn’t have been done, but would be needed in this present economy. Now at what cost will it be for the American people?
Economist say that it will probably have little (if any) impact on the economy. The reason for that is, none of the cuts come until 2014. Many economists and the Federal Reserve Chairman Bernanke advised Congress that cutting too much too soon could hurt the weak economy. They also recommended that reduced spending over the long term would help the economy.
According to the deal, discretionary spending would be cut $21 billion next year and $42 billion in 2013. Social Security Medicare and Medicaid will not be touched, as the more “politically aware” knew would happen. It was a scare tactic all along. A political tool that the politicians, both Republicans and Democrats alike, use against the other. What kills me is the fact that these cuts will only add up to about 0.2% of the entire economy’s output for that time period.
The rest of the cuts will come over a period of 10 years (why always 10?). The first phase will reduce spending by $917 billion and the second phase will add another $1.5 trillion which will be decided by a congressional committee. So let’s create another committee to look into something else the government screwed up on.
The politicians we have in Washington are trying to “fix” the problem in which they caused in the first place. Let’s face it, we are going to face the pain one day for the actions of our past. We need to cut the spending now, not over a period of 10 years. Don’t get me wrong, I know it shouldn’t be immediately. No matter what they (politicians) tell us I know the economy is struggling and as for a recovery, the past two years, the federal government has been hindering it from really happening.
I (like many of you) haven’t read this bill/deal/sellout yet, but I’m sure there’s some scary stuff in it. One thing stated in the deal is that if lawmakers fail to reach a deal on the second round of cuts, The Pentagon’s budget will automatically be cut by $500 billion.
All I can say is that this deal made it possible for all of the politicians to pass this issue off once again until after another election. OK, they avoided default, but let’s be for real, the credit agencies can still go ahead and down grade the United States.
Which in turn will cause interest rates to go up for everyone.
That is what the cost will be for the American people. Higher rates in a time when the economy is in the toilet (and will remain for some time), unemployment is at 9.2% (until the July report comes out on Friday) and the financial future of this country is still unknown.