Arab Today, arab today the terrible reality of a us default
Last Updated : GMT 20:41:37
Arab Today, arab today
Arab Today, arab today

The terrible reality of a US default

Arab Today, arab today

Arab Today, arab today The terrible reality of a US default

Washington - Arabstoday

Failure to reach a deal to raise the US debt limit may force President Barack Obama to choose between paying Chinese bondholders or American soldiers, and between Iowa farmers or elderly Social Security recipients. Those are among the dilemmas Obama may confront should talks with Republicans founder and the government falls short of funds needed to pay its bills. Other choices would include whether to sell at cut-rate prices financial assets such as gold in Fort Knox or loan portfolios acquired through the bank bailout, to avoid default and keep government services going. Even if full payments are made to bondholders, interest rates on US debt may still rise, setting off ripples through the financial world that would drive up costs for other borrowers and impede economic growth, said bond traders. \"Stopgap measures such as picking and choosing which programmes to support would almost be as bad as default itself,\" said Christian Cooper, head of US dollar derivatives trading in New York at Jefferies Group Inc., one of 20 primary dealers that trades with the Federal Reserve. While House Speaker John Boehner and other Republicans say the US Treasury\'s August 2 deadline for when its borrowing authority will reach its limit is artificial, economists and former government officials say those are the types of questions the Obama administration will face if no accord is reached. \"It\'s a real deadline,\" said Jay Powell, a former Treasury undersecretary for President George H.W. Bush. \"Could you live through that for a month? Theoretically, you could. It would be very chaotic. It would hurt the economy.\" Yet the Treasury Department says it will exhaust a series of \"extraordinary measures\" in managing government finances to avoid exceeding the limit on August 2. And without authority to borrow additional funds, the federal government\'s day-to-day income from taxes and other revenue would only cover 56 per cent of projected expenses for the remainder of August, according to a study by the Bipartisan Policy Centre in Washington, where Powell is a visiting scholar. Since Congress already has legally obligated all the government spending, Treasury Secretary Timothy Geithner would be left to pick which bills are paid and which are delayed. The Congressional Research Service said in a report last month that one precedent the White House might follow is focusing first on maintaining essential services such as the military, law enforcement and air traffic control as it did in the mid-1990s government shutdowns. Under one scenario developed by the Bipartisan Policy Centre, the federal government would be able to use its projected $172 billion (Dh631.7 billion) in income to meet its $29 billion in interest payments in August along with Social Security, Medicare and unemployment benefits and payments to defence contractors, if it ceased all other functions. As a consequence, under that scenario, the military and civilian federal workers wouldn\'t be paid, IRS refunds wouldn\'t go out, and veterans wouldn\'t get benefits. A report by George Mason University\'s Mercatus Centre cited by some Republican members of Congress estimated the federal government has $2.4 trillion in assets such as gold, currency reserves and loan portfolios that could be sold to private investors to temporarily make up the funding shortfall for months. Mary J. Miller, assistant Treasury secretary for fin-ancial markets, rejected the idea in a May 6 statement as a \"fire sale\" of financial assets that \"would be damaging to the economy, taxpayers, and financial markets.\" Even so, Veronique de Rugy, a senior research fellow at Mercatus and co-author of the report, said asset sales would be preferable to the consequences of a default that the Obama administration holds out as the inevitable result of failure to meet the deadline. She cites a rush sale of equity investments held by the Treasury Department\'s Troubled Asset Relief Programme that Mercatus valued at $142.5 billion as of September 30, 2010. \"Let\'s say people who would buy these assets know we are in a hurry and play hardball, maybe give us $50 billion. Well, better than defaulting,\" de Rugy said. Some Democrats in Congress also have discussed the idea of claiming presidential authority to continue borrowing without congressional approval based on an interpretation of the Constitution\'s 14th Amendment. A provision originally passed to prevent Southern sympathisers from later repudiating the federal government\'s Civil War debt declares the \"validity\" of US government debt \"shall not be questioned.\" Senator Charles Schumer of New York, the chamber\'s third-ranking Democrat, told reporters last week the issue is \"worth exploring,\" though \"you wouldn\'t want to just go ahead and issue the debt and then have one of the courts reverse it.\" Cooper, of the Jefferies Group, said either issuing debt under such an untested legal theory or financing the government with unusual asset sales would risk raising investor anxiety and increasing interest rates. President Barack Obama was yesterday scheduled to meet congressional leaders from both parties to negotiate an increase in the nation\'s $14.3 trillion(Dh52.5 trillion) legal debt ceiling. Obama is open to a long-term deal to tackle the country\'s finances, although he and other Democrats say an agreement must include revenue increases. John Boehner, Speaker of the House, says any plan that calls for higher taxes wouldn\'t pass Congress. The administration has resisted offering any guidance on how the Treasury Department would respond should the talks fail. David Plouffe, Obama\'s chief political adviser at the White House, dismissed as \"inconceivable\" the idea that the government would choose between paying investors and soldiers. From / Gulf News

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today the terrible reality of a us default Arab Today, arab today the terrible reality of a us default


Arab Today, arab today
Arab Today, arab today Jordan airline suggests flyers 'talk'

GMT 11:59 2017 Friday ,24 March

Jordan airline suggests flyers 'talk'
Arab Today, arab today 5 Crafty Must-Have Limited-Budget Ideas

GMT 17:03 2017 Saturday ,25 March

5 Crafty Must-Have Limited-Budget Ideas
Arab Today, arab today Rebel supporters flood Yemen streets

GMT 06:39 2017 Monday ,27 March

Rebel supporters flood Yemen streets
View News in Arabic - Business: نفط وبتروكيماويات
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Yemen children dream of school

GMT 07:25 2017 Friday ,24 March

Yemen children dream of school
Arab Today, arab today Trump to roll back Obama clean power plan

GMT 11:10 2017 Monday ,27 March

Trump to roll back Obama clean power plan
Arab Today, arab today Prepares to give stargazers an eyeful

GMT 13:38 2017 Monday ,06 March

Prepares to give stargazers an eyeful
Arab Today, arab today Uber grounds self-driving cars

GMT 09:11 2017 Monday ,27 March

Uber grounds self-driving cars
Arab Today, arab today Audi RS 5 Coupe acquires new design

GMT 13:22 2017 Thursday ,23 March

Audi RS 5 Coupe acquires new design
Arab Today, arab today Nermein Al Fekki films “Foxes in the Valley”

GMT 09:58 2017 Saturday ,25 March

Nermein Al Fekki films “Foxes in the Valley”
Arab Today, arab today Salvage of South Korea's Sewol ferry

GMT 04:51 2017 Friday ,24 March

Salvage of South Korea's Sewol ferry

GMT 06:21 2017 Friday ,24 March

MP submits a petition to dismiss university head

GMT 18:57 2017 Tuesday ,21 March

Accessories designer reveals her new collection

GMT 15:25 2017 Tuesday ,21 March

2017 already marked

GMT 13:26 2017 Friday ,24 February

Expresses Algerian history by woody figures

GMT 20:03 2017 Saturday ,25 March

Health expert warns from dust sensitivity

GMT 07:36 2017 Wednesday ,22 March

US, Britain ban laptops on flights

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons

GMT 19:27 2017 Saturday ,11 March

Boualsof launches "Priestess Kahina" collection
Arab Today, arab today
Arab Today, arab today
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday