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

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

Karzai's Legacy: Missed Opportunities?

Afghanistan's president leaves behind a much different nation than the one he inherited, yet his legacy from 13 years in power is getting mixed reviews More

Secret Service Chief Under Fire for White House Security Breach

Julia Pierson faces tough questions from lawmakers after recent intrusion at White House, says: 'It is clear that our security plan was not executed properly' More

Frustrated, Liberian Students Want Ebola Fight Role

Thousands have volunteered to go to counties, rural villages to talk to people in their language about deadly virus More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Malaysia Struggles to Stop People Joining Jihadi
X
Mahi Ramakrishnan
September 30, 2014 2:16 PM
Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Iran's Rouhani Skeptical on Syria Strikes

Iranian President Hassan Rouhani expressed skepticism Friday that U.S.-led airstrikes in Iraq and Syria could crush Islamic State militants. From New York, VOA’s Margaret Besheer reports the president was also hopeful that questions about Iran’s nuclear program could be resolved soon.
Video

Video US House Speaker: Congress Should Debate Authorization Against IS

As wave after wave of U.S. airstrikes target Islamic State militants, the speaker of the Republican-controlled House of Representatives says he would be willing to call Congress back into session to debate a formal, broad authorization for the use of military force. VOA’s Michael Bowman reports from Washington, where legislators left town 10 days ago for a seven-week recess.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Video

Video Ebola Robs Liberians of Chance to Say Good-Bye to Loved Ones

In Liberia, where Ebola has killed more than 1,500 people, authorities have worked hard to convince people to allow specialized burial teams to take away dead bodies. But these safety measures, while necessary, make it hard for people to say good bye to their loved ones. VOA's Anne Look reports on the tragedy from Liberia.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

World Currencies

EUR
USD
0.7866
JPY
USD
109.25
GBP
USD
0.6139
CAD
USD
1.1120
INR
USD
61.428

Rates may not be current.