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United States Debt – The Congressional Debt Deadlock

in Debt 101

American politics has turned into a tug-of-war over the national debt in the past few months. Running a total of nearly fifteen trillion dollars, a figure that represents around a third of the nation’s gross domestic product, the current fiscal year has proven to have already exhausted the current state of the US revenue. As such, further government spending would require deficits that adding more borrowing onto the pile.

The national debt has long been an issue on the back burner of American politics. While the same problem arose following the Second World War, it was paid down during the following two decades of economic prosperity and increased tax rolls. As the economy continues to plod along without signs of improvement, with unemployment at around ten percent and credit ratings plummeting, it is unlikely that the current Debt Deadlock may be assuaged by future tax revenue.

Government spending has never been higher in United States history, as unprecedented numbers of senior citizens are collecting money from Social Security and Medicare, while the American military wages two costly wars simultaneously, the price tags of which approach one and a half trillion dollars each. This may seem like a staggering quantity of money to the average American, but the United States’ national debt is actually smaller on a per capita basis than those of the United Kingdom and Japan. Still, the burden of each US citizen — man, woman, and child — is approximately fifty thousand dollars, meaning that severe tax increases or severe cuts to spending (or both) are necessary to pay off the deficit.

The Debt Deadlock represents a major source of consternation between the Republican-controlled Congress and the Democrat-controlled White House. Republicans are adamant about cutting spending while Democrats are seeking to repeal George W. Bush’s tax cuts in order to increase revenue. Congress has claimed that they will not sign a bill, which has a single tax increase, and has been demanding that President Obama make severe cuts to the government’s budget in order to pay down the current deficit.

The option of raising the debt ceiling is a possibility, though it is not a permanent solution to the problem. If the government raises the ceiling and prints more money, as they have done in the past when funding has run dry, they run the risk of inflation and damage to national credit.

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A decision must be made and it seems likely that the ceiling will be raised. The Debt Deadlock, however, is here to stay, with little to no chance of paying down the figure in the near future. The American voters will respond to both parties’ stances during this squabble in the 2012 elections, meaning that the deadlock could very well determine whether a Republican or a Democrat will be President next election.

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