Opinion: America's dogfight over debt woes worsening

09:46, June 01, 2011      

Email | Print | Subscribe | Comments | Forum 

The dogfight between the two major US political parties on whether to raise the federal deficit ceiling and avoid a default on American debts has just begun.

The stakes are high that, if no agreement comes out, the US would be sent to another financial crisis and the global economy would face the dim prospect of another great recession.

China, now holding more than 8 percent, or nearly $1.2 trillion US Treasury bonds, is certainly concerned about the quagmire, as the security of the debts repayment is on the line.

Currently, Chinese online chat-rooms are awash with ordinary people's demands for Beijing to draw down its purchase of American debts, and shift to other securer investments including buying more oil and resources as strategic reserves.

On Tuesday, US Congressional Republicans defeated a bill that proposed for a $2.4 trillion increase in the nation's debt limit. The lopsided vote, with just 97 in favor of the measure and 318 against, doesn't bode well for the impending difficult negotiations between the White House and the Congress.

The conservative Republicans are demanding deeper cuts into Obama's government spending plans to accompany any rise in federal borrowing. Their demand seems popular among a majority of American voters. For a long time, Americans have thought their governments have been addictive to spending on borrowed money, dragging the world's largest economy to a big fiscal hole.

Analysts say that the Republicans will have to back down. If they refuse to raise the debt ceiling – now set at $14.29 trillion., the US government will run into bankruptcy, which will immediately cause a flight of the US dollars and send the US economy back to contraction, if not a depression.

Eventually, a compromise between Obama-led Democrats and the conservative Republicans will be reached before August 2, the date the Treasury Department believes its coffers will run out.

However, Tuesday's vote sends a clear signal to US politicians that their long affection for deficit spending is unsustainable. House Speaker John Boehner said: "It's true that allowing America to default would be irresponsible, but, it would be more irresponsible to raise the debt limit without simultaneously taking dramatic steps to reduce spending and to reform the budget process."

Actually, the US could choose to reduce federal funding on retirees' pensions and medical care appropriations to constrain spending. The White House and Congress could also agree to increase taxes on personal income and corporate income to boost the federal budget.

But, it is politically perilous for both Democrats and Republicans to tell Americans to tighten belts. It is hard for Americans to get rid of their habit of lavish spending and saving less.

By People's Daily Online
 
 
     
 
Wen Jiabao attends trilateral leaders' meeting of China,Japan and ROK
 
The Third China-U.S.Strategic and Economic Dialogue
 
     
 
 
 
  Weekly review  
 
May 27   Kim calls for close ties through generations
 
May 23   China intends to enhance friendship with Japan
May 23   Expert: Ecological problems not all due to Three Gorges Dam
May 24   Top military official's visit promotes China-US military ties
May 28   The week in pictures
May 25   'China fever' sweeps US tourism industry
May 26   US should not monopolize cyber affairs
May 26   Salty tide hits Shanghai as drought lingers
May 25   A new chapter for China-South Africa cooperation
May 27   Military trusted most of all Chinese institutions
 
     
 
 

(Editor:梁军)

  • Do you have anything to say?

双语词典
dictionary

  
Special Coverage
  • China battles droughts
  • Wen Jiabao attends trilateral leaders' meeting of China, Japan and ROK
Major headlines
Editor's Pick
  • Murray edges out Troicki to reach quarterfinals at French Open
  • Beautiful scenes from ancient Dali
  • People attend rally in support of Mladic in Banja Luka
  • Blonde Parade kicks off in Minsk, Belarus
  • Greeks protest against austerity measures in Athens
  • 'Expo Trashion' festival kicks off in Mexico
Hot Forum Dicussion