News / Economy

US Economy Faces Another Cliff

US Economy Faces Another Cliffi
X
January 18, 2013 12:52 AM
The U.S. may have avoided the fiscal cliff, but analysts say the last minute Congressional agreement at the start of the year to raise taxes on wealthy Americans and avoid massive spending cuts was only a temporary fix. Now, even as President Barack Obama begins his second term, another financial crisis is looming - one with potentially severe implications for the world's largest economy. Mil Arcega has more.

US Economy Faces Another Cliff

TEXT SIZE - +
The U.S. may have avoided the fiscal cliff, but analysts say the last minute Congressional agreement at the start of the year to raise taxes on wealthy Americans and avoid massive spending cuts was only a temporary fix.  Now, even as President Barack Obama begins his second term, another financial crisis is looming - one with potentially severe implications for the world's largest economy.

The U.S. government has already reached the congressionaly imposed borrowing limit of $16.4 trillion and could run out of money by mid-February.

New York trader Benedict Willis says the coming debate over raising the debt ceiling could be even more acrimonious.

"Now we'll go from the talk of fiscal cliff, I'm sure we'll start talking about the St. Valentine's Day massacre because that's really the deadline we'll be looking at as far as the deficit reduction and the debt ceiling talks are concerned," Willis said.
 
Republican House Speaker John Boehner is demanding major spending cuts in exchange for any agreement to raise the debt limit.

But President Barack Obama calls that - irresponsible.

"If congressional Republicans refuse to pay America's bills on time, Social Security checks and veteran's benefits will be delayed.  We might not be able to pay our troops or honor our contracts with small business owners," Obama said.
 
The government would be unable to pay the interest on its debts -- creating massive turmoil in world markets.

But analysts say the damage is already done.

"If you're a business and you are about to hire 100 new employees but are not sure what is going to happen with the debt ceiling, you're going to wait until the situation has passed. So as Congress is bickering, it's really kind of like pulling back the reins on the horse and not letting the horse run," said financial adviser Frank Reilly.

The last budget battle in 2011 resulted in the first credit downgrade of U.S. debt.

Although investors continued to buy U.S. bonds, Marc Goldwein at the Committee for a Responsible Federal Budget says another downgrade could damage U.S. credibility.   
 
"A downgrade from 'Triple A' to 'Double A' by itself doesn't usually have that much of an effect.  It's basically saying instead of your bonds being really good, it's very good.  That's basically how they qualify it. The danger is - what about the next downgrade, and the next one?," Goldwein said.

House Speaker John Boehner admits the consequences of not increasing the debt limit are real, but he says - so too are the consequences of allowing the country's spending to go unchecked.

You May Like

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

John the XXIII and John Paul II will be made saints in a ceremony at St. Peter’s Square on April 27 More

Thailand Reacts to Plots Targeting Israelis

Authorities hope arrest of two Lebanese suspects will disrupt plot to attack young Israeli tourists More

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

'Once Upon a Forest' takes viewers deep into heart of tropical rainforest More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pope Francis Hopes Dual Canonizations Will Reconcile Churchi
|| 0:00:00
...
 
🔇
X
Jerome Socolovsky
April 22, 2014 4:14 PM
On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Robotic Mission Kicks Up Lunar Dust

A robotic mission to the moon was deliberately crashed onto the lunar surface late last week, but not before scientists had collected data gathered by the spacecraft which was designed to self-destruct. VOA's Rosanne Skirble reports on the preliminary findings of the craft, called LADEE - an acronym for Lunar Atmosphere and Dust Environment Explorer.
Video

Video Boko Haram Claims Responsibility for Bombing in Nigerian Capital

The Nigerian militant group known as Boko Haram has claimed responsibility for a bombing in the capital on April 14th that killed 75 people. In the video message, Abubakar Shekau, the man who says he ordered the bombing, says nothing about the mass abduction of more than 100 teenage girls, most of whom are still missing. Heather Murdock has more for VOA from Abuja.
Video

Video Ukraine Developments Hang Over Obama Trip to Asia

President Barack Obama's trip to Asia this week comes as concerns over Beijing's territorial ambitions are growing in the region. Those concerns have been compounded by Russia's recent actions in Ukraine and the possibility that Chinese strategists might be looking to Crimea as a model for its territorial disputes with its neighbors. VOA's Bill Ide has more from Beijing.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid

World Currencies

EUR
USD
0.7217
JPY
USD
102.17
GBP
USD
0.5949
CAD
USD
1.1009
INR
USD
60.326

Rates may not be current.