Tags: Morici | Deficit | Drama | continue | 2012

Morici: Deficit Drama Will Continue Into 2012

Monday, 25 Jul 2011 09:06 AM

Congress and the White House will likely agree to lift the $14.3 trillion debt ceiling by an Aug. 2 deadline and steer the government away from default, but the issue won’t be gone for long, says Peter Morici, Professor at the Smith School of Business, University of Maryland.

Most in Congress want to lift the ceiling but to narrow the country’s gaping deficits in the process, Republicans remain opposed to certain tax hikes while Democrats oppose certain spending cuts.

“By Aug. 2, the Congress and President will likely come up with a patchwork plan to cut spending and increase revenue over the next ten years, the debt-ceiling will be raised, and Armageddon will be averted — but only for a brief period,” Morici writes in a CNBC guest blog.
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“Angst will begin anew next February when the President publishes his 2013 Budget, and bond rating agencies see quite plainly the United States does not have a credible plan to bring its growing debt under control.”

geithnergtty200left.jpg
Treasury Secretary Timothy Geithner
(Getty Images photo)
Healthcare and other costs are too high, and will only grow as grow.

“Even with a few hundred billion annually in reduced spending and some new revenues, deficits in excess of $1 trillion each year can be expected indefinitely,” Morici says.

“Those projections will compel bond rating agencies to cut the U.S. credit rating from AAA, driving up borrowing costs for the federal and state governments, home buyers and private business.”

Treasury Secretary Timothy Geithner says lawmakers need to lift the ceiling right now.

"The most important thing is that we remove this threat of default from the country for the next 18 months," Geithner says in an interview with CNN's "State of the Union" program.

"You want to take this out of politics."

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Congress and the White House will likely agree to lift the $14.3 trillion debt ceiling by an Aug. 2 deadline and steer the government away from default, but the issue won t be gone for long, says Peter Morici, Professor at the Smith School of Business, University of...
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2011-06-25
Monday, 25 Jul 2011 09:06 AM
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