Top Economist: GOP Will Win Debt Ceiling Battle

Wednesday, 01 Jun 2011 01:22 PM

By Martin Gould and Kathleen Walter

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House Republicans have the advantage in their battle with the Obama administration over whether to raise the debt ceiling, economist Mark Skousen tells Newsmax.TV in an exclusive interview.

But even so, Skousen is convinced that the combatants will reach a compromise by Aug. 2 deadline set to raise the $14.3 trillion limit on federal borrowing.

“It will be resolved, no question about it,” Skousen said. ”The House Republicans hold all the cards, so they can put Obama’s feet to the fire and require him to (make) greater cuts.”

Story continues below video.

Skousen, editor-in-chief of the Forecast and Strategies Investment Newsletter, said he does not see the end result being too extreme. House Budget Committee Chairman Paul Ryan’s budget proposal is not that radical, he said.

“His balanced budget does not balance the budget in 20 years, so it’s not like the Republicans are demanding that much,” Skousen said.

All “responsible” legislators recognize that the country cannot default on its debt, but the GOP threats still can be effective, the investment analyst said.

“House Republicans are in a great position to really put the screws on the Obama administration and say, ‘Listen, let’s just live within our means . . . We need to get our act together and stop pretending that we don’t have these liabilities. We have over-promised too much to the American people and we have to get our act together.’

“It’s not going to result in a balanced budget,” Skousen predicted. “But it will require the Obama administration to give up more spending.”

When asked whether he could see any doomsday scenario, Skousen said it would be “a serious breach” for the United States to start defaulting on debts worldwide. “This is not serious default. Everybody knows what default means and it could wreak havoc in a very anemic economic recovery.

“But we are in a deep hole and, unfortunately, if we don’t get control of our spending, we are just digging a deeper hole — we may not be digging as fast, but we are still digging a deeper hole instead of getting out of it.”

He pointed out that Vice President Joe Biden is meeting with a bipartisan group — their next session is set for June 9 — to come up with $1 trillion in cuts over 10 years. “You’ve got to remember that they always use this 10-year period so it sounds like they are really cutting a lot when in fact they are not.

“The Republicans want $4 trillion in cuts so they are way far apart from each other and they are going to have to come to some kind of a compromise.”

On a personal level, Skousen said people have to be better prepared in dealing with their own finances. He advised everyone “to save money, to invest prudently, to make money on their savings and use it productively in business.

“Be prepared for the unexpected, whether it’s a tornado or hurricane, a natural disaster or government making one blunder after another.

“This is why I recommend investing in gold and silver, other types of investments, not too much, buy it as an insurance policy, but we need to protect ourselves against the uncertain future.”

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