We’re off to see the wizard . . .
Debt ceilings, credit downgrades, and a collapsing market oh my! Feels a bit lately like the U.S. is having a bad dream. Like we woke up in Oz and the Wicked Witch took over. Wake me up from this nightmare!
Many politicians probably wish they could click their heels and make it all go away. The truth remains that our fiscal problems are here for the long haul unless urgent changes are made. When you borrow from Peter to pay Paul, as it is in life, choices have consequences. The U.S. is now facing some tough times ahead because of poor choices…
Let us quickly get up to speed on where we are:
1. First we battled over raising the debt ceiling.
The August 2nd debt ceiling deadline came and went as the Treasury reassured the world financial markets that U.S. would not default on her debts. This was too close for comfort! When all the dust finally settled, it was determined by the non-partisan Congressional Budget Office that the federal deficit will be reduced by at least $2.1 trillion. Yet it is still uncertain where the majority of these cuts will be made.
We will definitely see defense and non-defense programs reduced by $741 billion over a 10-year period, which includes a $350 billion cutback in defense spending at the Pentagon. There will be an additional $156 billion in savings from lower interest costs on servicing our existing National Debts. Another $20 billion will be cut from education loan initiatives and through efforts to identify fraud and abuse in other mandatory federal programs. (Student loan funding will be reduced to $22 billion by 2021, but Pell Grant funding will increase by $5 billion by 2015.) A bipartisan committee of 12 will have to recommend between $1.2 trillion and $1.5 trillion in additional federal budget cuts by November 23rd.
- House Minority Leader Nancy Pelosi (D-CA) & Senate Majority Leader Harry Reid (D-NV) who will each get to select three Democrats.
- House Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY) who will each get to pick three Republicans.