Obama and Republicans Prepare for next Fiscal Showdown
President Barack Obama and the Republicans are already preparing for the next round of fiscal showdown that could come as soon as next month. That’s when Congress will tackle the nation’s debt ceiling.
Democrats have warned Republican leaders not to use the debt authorization for political advantage. During his weekly address, President Obama maintained that he would not trade spending cuts for an increase in the debt ceiling.
President Obama demanded that future spending cuts must be met with tax increases. He said that spending cut must be balanced with reforms to the tax code. He added that the wealthiest individuals and the largest corporations should not be able to take advantage of loopholes and deductions that are not available for most taxpayers.
A similar standoff regarding the increase of debt limit in 2011 made Standard & Poor’s to downgrade its rating of United States Treasury debt for the first time. The deadlock resulted in a slump of the market and analysts fear that another one could be more damaging to the economy.
Most Republicans said they do not want to increase the country’s borrowing limit unless Democrats agree to more spending cuts, especially on entitlement programs such as Medicare and Social Security. Representative Dave Camp of Michigan, chairman of the Ways and Means Committee, said that Congress need to focus on limiting spending and revamp the tax code.
Congress agreed to increase taxes on the wealthiest American taxpayers and postpone major cuts to the discretionary budget for two months. This compromise averted the so-called fiscal cliff. The deal will cut the deficit by an estimated $650 billion over the next decade. It is smaller than the trillions of dollars in deficit reduction that was previously offered by negotiators.
There are several issues that the 113th Congress needs to resolve. Some of them include increasing the debt ceiling, averting a government shutdown, and the mandated spending cuts. These will take effect in February and March.