Friday, August 5, 2011

The Aftermath Of The Unexpected Unison From Democrats & Republicans

A difficult month indeed for America and their leaders with each theories on how to save the economy. 

On July 31, 2011, President Obama announced that the leaders of both parties in both chambers had reached an agreement that would reduce the deficit and avoid default. The same day, Speaker Boehner's office outlined the agreement for House Republicans. The agreement would:
  • Cut spending more than it increases the debt limit. In the first installment ("tranche"), $917 billion would be cut over 10 years in exchange for increasing the debt limit by $900 billion.
  • The agreement establishes a joint committee of Congress that would produce debt reduction legislation by November 23, 2011 that would be immune from amendments or filibuster. The goal of the legislation is to cut at least $1.5 trillion over the coming 10 years and be passed by December 23, 2011. The committee would have 12 members, 6 from each party.
  • Projected revenue from the committee's legislation must not exceed the revenue baseline produced by current law.
  • The agreement specifies an incentive for Congress to act. If Congress fails to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress can grant a $1.2 trillion increase in the debt ceiling but this would trigger across the board cuts ("sequestration") of spending equally split between defense and non defense programs. The across the board cuts would apply to mandatory and discretionary spending in the years 2013 to 2021 and be in an amount equal to the difference between $1.2 trillion and the amount of deficit reduction enacted from the joint committee. The sequestration mechanism is the same as the Balanced Budget Act of 1997. There are exemptions—across the board cuts would apply to Medicare, but not to Social Security, Medicaid, civil and military employee pay, or veterans.
  • Congress must vote on a Balanced Budget Amendment between October 1, 2011 and the end of the year.
  • The debt ceiling may be increased an additional $1.5 trillion if either one of the following two conditions are met:
    • A balanced budget amendment is sent to the states
    • The joint committee cuts spending by a greater amount than the requested debt ceiling increase.
Most of the $900 billion in cuts occur in future years and so will not remove significant capital from the economy in the current and following year. Regarding the across the board cuts, these could not take place until 2013 and so if triggered, a new Congress could vote to eliminate or deepen all or part of them. Boehner was reported to be particularly concerned that any defense cuts could not go into effect until after 2013. The agreement contains the McConnell mechanism for the specified debt ceiling increases. The President may make the specified increases, but to stop them the Congress must pass a bill to disapprove of them by the two thirds majority needed to override a veto.

And the aftermath is that all was for nothing.
USA's credit have been downgraded.

The credit rating agency Standard & Poor's has downgraded the debt rating of the United States for the first time in the history of this type of analysis.

S & P reported on a step that will reduce the country's rating from AAA, the highest possible, to AA +. The agency said tonight that took this decision because the deficit reduction plan, approved Tuesday by Congress, did not provide for adequate measures to stabilize the national debt.

A person close to the discussions said the administration of President Barack Obama believes that the analysis of S & P contained "deep and fundamental flaws." reported AP today.

Make no mistake people, but history has taught us that when republicans are in control of a nation that has violence and senseless ways of spending can lead to this.
President George W. Bush. Thank you for your legacy. Your traditionalism and conservatism along with the F'N Tea Party have made USA to go as far as The Great Depression of the early 90's.

I just want to close saying that really disgust me when a latin, *cough*Fortuño*cough...(Sorry)... says he is a republican when the higher powers of the party think of us as a plague.

My 25 cents