News / Economy

Supercommittee Failure to Rein In US Debt Threatens Global Recovery

A so-called U.S. Congressional "supercommittee" has less than one week before a deficit-cutting deadline on November 23.  Some economists say the prospects for success are poor while others say failure is not an option.  Many are urging the bipartisan committee of six Republicans and six Democrats to make big changes to get the huge U.S. debt under control.  Economists say failure could seriously hurt the world's largest economy, and countries that do business with it.

With an economy about one fourth the size of the world's GDP (gross domestic product), any threat to the U.S. economy is a potential threat to other countries that do business with it.  Jason Peuquet, a policy analyst at the New America Foundation says it does not take a large economy to see how interconnected the world has become.

"We saw that one smaller country in the EU, Greece, could really almost bring down Europe and threaten the global economy," he said.  "So if we can see that in just one smaller country, imagine what would happen in the world's largest single economy, the United States."

Some say U.S. debt - now edging close to $15 trillion - is growing too fast.  That's why economists say the congressional committee tasked with trimming the nation's deficit must act decisively. Unless politicians deal with the problem now, Diane Lim Rogers, chief economist at the Concord Coalition, says worries about the nation's ability to repay its debts will make the U.S. less attractive to investors.

"The scary part from an economic perspective is we're not going to know we've reached that point where we've borrowed so much that we're not looking like a safe investment," she said.  "We're not going to know that until it happens - very rapidly.  It's sort of like you don't known you're near the edge of the cliff until you're already off the cliff."

 

U.S.Debt

Like Greece and Italy, experts say if that happens, interest rates on U.S. securities will spike, making it costlier for the country to repay its debts.  Lim Rogers says it's a burden the next generation would be forced to carry.

That's why New America Foundation's Peuquet says the supercommittee can not afford to fail.

"Extending the deadline would be much better than failure, because it keeps the conversation going," he said.  "We've got the focus of the world, the markets, businesses, the American public.  And this is a real opportunity, so we hope the supercommittee recognizes that."

Failure to reach a deal by November 23 would trigger automatic spending cuts worth more than one trillion dollars.  Those cuts would come primarily from defense and domestic spending programs - without the benefit of new revenue.

"So it's a spending side only approach, it leaves us with a very spending heavy strategy for deficit reduction at a time when we're still struggling to come out of our recession," said Diane Lim Rogers.

Such "brute force" spending cuts could hurt social programs for unemployed and lower income Americans and hamper the country's military readiness.  

Some economists warn a political deadlock could also lead to another downgrade of U.S. debt, sending markets into a tailspin that would further weaken the world's economy.

You May Like

University of Michigan Wins Solar Car Race

Squad guided its student-designed solar-powered vehicle to fifth consecutive time victory in eight-day bi-annual American Solar Challenge More

Nigerian Islamic School Tries to Combat Boko Haram

Kaduna school headmaster teaches his students that what militants are doing is are doing is 'a total misunderstanding of the Islamic religion' More

University Trains Students to Advocate for Deaf People Worldwide

Program prepares graduates to advocate internationally for access to education, jobs for people with disabilities More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Vietnamese Staging Chinese Product Boycott After Oil Rig Spati
X
Reasey Poch
July 28, 2014 7:18 PM
China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video ESA Spacecraft to Land on a Comet

After a long flight through deep space, a European Space Agency probe is finally approaching its target -- a comet millions of kilometers away from earth. Scientists say the mission may lead to some startling discoveries about the origins of the water on earth. VOA’s George Putic has more.
Video

Video Young Africans Arrive in US for Leadership Program

President Barack Obama's Young African Leadership Initiative has brought hundreds of young Africans to the United States for a six-week program aimed at building their knowledge and skills in fields such as public administration and business. Out of the 50,000 young Africans who applied for the program, just one percent was accepted. VOA's Laurel Bowman caught up with some of those who made the cut and has this report.
Video

Video In Honduras, Amnesty Rumors Fuel US Migration Surges

False rumors in Central America are fueling the current surge of undocumented young people being apprehended at the U.S. border. The inaccurate claims suggest the U.S. will give amnesty to young migrants from the region. As VOA's Brian Padden reports from Honduras, these rumors trace back to President Obama's 2012 executive order to halt deportations for some young undocumented immigrants already living in the United States.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.