Debate over how to tackle the national debt continues, with congressional Republicans still unwilling to cede ground when it comes to increasing tax revenue. While President Obama and congressional Democrats continue to insist that new tax revenues need to be a part of balancing the budget and decreasing the deficit, Republicans maintain their position that increasing taxes, even on the wealthy, would only place a burden on the already unstable economy. During a meeting Sunday, little headway was made in reaching an agreement between the two sides.
With discussions at a standstill, President Obama, House Speaker John Boehner, and other leaders have adjusted their expectations, and are now seeking a more modest debt reduction deal. Leaders will again meet at the White House this afternoon to continue discussions.
But more important than cutting the deficit is raising the $14.3 trillion debt limit by the Treasury’s August 2 deadline. After that date, the Treasury says it will run out of money for paying the country’s bills, which could not only jeopardize the country’s global economic status, sending a signal to our debtors that we are no longer a safe investment, but could also push the country back into recession.
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Much of last week was spent discussing a more ambitious budget deal than is now likely to pass — one that both reformed the tax code and social spending programs while cutting the annual defense budget and domestic spending. That plan would have cut $4 trillion over the next 10 years, a number that budget experts said was necessary in order to keep the national debt at a sustainable level. Obama originally pushed for $1.3 trillion to $1.7 trillion of total to come from new tax revenue. After Bush’s tax cuts, the wealthiest Americans are paying far less than they were in the 1990s, and Obama’s plan would increase their contribution to 1990s levels by ending various tax breaks.
While original support for massive budget cuts was led by Republicans, now the Democrats are pushing for a “grand bargain” while Republicans are seeking a more modest deal in the range of $2 trillion in savings, which would cover the country’s borrowing needs through the 2012 elections.