Tags: Citi | Debt | Ceiling | Impasse

Citi Economist: Debt Ceiling Impasse to Roil 2013

Thursday, 29 March 2012 07:20 AM

A debt ceiling debate similar to the one that nearly threw the country into default in 2011 will grip the government in early 2013, just after the Bush tax cuts expire, says Citi economist Steven Wieting.

The Bush Tax cuts expire at the end of December, however, if extended and if Congress sticks with current income tax levels, then the country may run up against its $16.4 trillion debt ceiling some time at the end of 2012.

The administration can tap cash reserves at the Treasury to keep operating for a few months, but not long enough to forgo debating raising the ceiling, especially with no new sources of revenue.

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The government's fiscal year ends Sept. 30, three months behind the calendar year.

"By the end of the fiscal year 2012 (Sept. 30), the administration expects debt subject to the limit to be $60 billion below the ceiling," Wieting writes in a report, according to Business Insider.

"The monthly budget deficit is likely to be near $80 billion in October 2012 by our estimates."

In 2011, political bickering among Republicans and Democrats came to an end right on the day of a deadline to raise the debt ceiling and avoid default, although Standard & Poor's stripped the U.S. of its AAA rating on sentiment the government didn't commit enough resources to narrowing deficits.

U.S. deficits continue to worry investors worldwide.

House Republicans recently unveiled a 2013 budget proposal that would slash $5.3 trillion in spending over the next decade while cutting taxes for homeowners.

"This plan of action is about putting an end to empty promises from bankrupt government and restoring the fundamental promise of America: ensuring that our children have more opportunity than we do," says House Budget Committee chairman Paul Ryan, a Wisconsin Republican, according to the AFP newswire.

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Thursday, 29 March 2012 07:20 AM
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