Last Seven Sleepless Night of United States President Mr. Barack Obama
The Reason Behind the Phenomenon has been detailed below in Issue and It’s possible reason Format.
What is the crisis about?
Since 1917, the US Congress has stipulated that there has to be a statutory limit on US public debt (debt of US federal govt). This limit has been periodically raised and now stands at $14.3 trillion (95% of the US GDP). The US will hit this limit on Tuesday, Aug 2, unless Congress approves a fresh hike. But the Republican-controlled House of Representatives and Democrat-controlled Senate haven’t been able to work out a consensus
Why are they fighting?
The Republicans want any debt limit hike linked to deep cuts in govt spending. They want the increase to be effective for a year, with fresh discussions after that. The objective is obviously to make it an issue ahead of the 2012 presidential elections. Democrats favour tax increases and a one-shot raising of the ceiling. They are also opposed to any cuts that could jeopardize the economic stimulus and welfare payments
What happens if debt ceiling is not raised?
US govt can’t pay employees, social security benefits, defence contractors, medical insurance bills and interest to lenders. Credit rating will plunge from top ‘AAA’ to bottom D’
What will be the global impact?
Govts, investors and businesses across the world will stop investing in US bonds. There will be panic in financial markets globally, with investors exiting equities for safe havens like liquid cash and gold
Does it affect India?
Indirectly, though much less than countries/blocs with big trade and debt dealings with US, like EU and China. Still, a worldwide downturn could hit Indian exports and FDI flows
When did this debt accumulate?
Barack Obama (fighting recession, wars in Afghanistan and Iraq) $2.4tn
George W Bush (wars and tax cuts) $6.1tn
Bill Clinton $1.4tn
George Bush $1.5tn
Ronald Reagan $1.9tn
Earlier $1tn
Whose money has the US taken?
Foreign countries (including China $1.2 tn) $4tn
US public and cos $3.6tn
US federal system $6.2tn
Always Your — As Usual Saurabh Singh
Impressions of Visitor & Few Replies