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U.S. faces default
U.S. faces default: Voice of Russia
Tags: default, World, Commentary, US debt, Business, US economy
Vesnovskaya Maria
Jul 8, 2011 15:08 Moscow Time
Photo: RIA Novosti
American tycoon Warren Buffett has found a way to save the United States from an impending default. His companies are ready to prepay all taxes and thus urgently provide the budget with immediately available funds. He also called on the country’s other large companies to follow suit and chip in for a purpose. Voice of Russia’s Maria Vesnovskaya has more.
A technical default may be declared in the US as early as in mid August if the government fails to pay out bond interest and dividends. This can be prevented through raising the bar for that country’s external debt, pursuant to an initiative put forward by the Obama administration but blocked by a voting in Congress. Lawmakers say they will only pass the bill provided that the Democrats agree to accept their proposal on budget spending cuts. The re-vote is slated for August 2nd . If the parties fail to agree and vote consistently for a state debt increase, the United States will face bankruptcy. This issue has been repeatedly debated over the last few years, inalterably resulting in decisions to raise the debt ceiling that has reached $15 trillion as of today. But now, on the eve of the US presidential elections, any economic issue turns into a target for political bargaining and therefore cannot be resolved as easily as it used to, says President of the Neocon Expert Consulting Company Mikhail Khazin.
"The Democrats and Republicans have different views on expenses. The former think they should be increased to stimulate the economy, whereas the latter, on the contrary, point to the need of reducing taxation and expenses. Now they’ve transferred the problem into political sphere and there is no way out of this debate. The Democrats act in a rational way, using the growing expenses to compensate for the falling aggregate demand. The Republicans, in their turn, cannot waive their stand of no consent with the Democrats, which will virtually imply their defeat in this political struggle," stresses Mikhail Khazin.
From this perspective, Warren Buffett’s suggestion concerning an early payment of taxes should be taken not as a real way out of the situation but a signal of its coming to a deadlock, Mr. Khazin added.
"Buffett’s proposal has nothing to do with anything. He just suggested prepaying the taxes but this money will soon disappear from the budget."
According to a number of experts, the Republicans have chosen the wrong strategy, saying that neither a technical nor a short-term default will severely affect the economy. They even refer to it as a necessary means of toning down the Democrats and forcing them to negotiate the budget policy. But this will hardly have a positive effect on both the economy and the party’s presidential race prospects. Irina Bukina, an expert on US studies at the Institute of Economics, has her opinion on the issue:
"In general, any threats are negatively perceived by the voters. It is therefore difficult to imagine that they can help a party ensure a really stable majority of the votes. In this case, politicians are guided by more positive statements and offer various solutions," Irina Bukina said.
Any economic problems in the US may entail a crisis in global markets. Experts forecast that even a short-term default may lead to a catastrophe much more destructive than the collapse of Lehman Brothers and the financial crisis of 2008
U.S. faces default: Voice of Russia
Tags: default, World, Commentary, US debt, Business, US economy
Vesnovskaya Maria
Jul 8, 2011 15:08 Moscow Time
Photo: RIA Novosti
American tycoon Warren Buffett has found a way to save the United States from an impending default. His companies are ready to prepay all taxes and thus urgently provide the budget with immediately available funds. He also called on the country’s other large companies to follow suit and chip in for a purpose. Voice of Russia’s Maria Vesnovskaya has more.A technical default may be declared in the US as early as in mid August if the government fails to pay out bond interest and dividends. This can be prevented through raising the bar for that country’s external debt, pursuant to an initiative put forward by the Obama administration but blocked by a voting in Congress. Lawmakers say they will only pass the bill provided that the Democrats agree to accept their proposal on budget spending cuts. The re-vote is slated for August 2nd . If the parties fail to agree and vote consistently for a state debt increase, the United States will face bankruptcy. This issue has been repeatedly debated over the last few years, inalterably resulting in decisions to raise the debt ceiling that has reached $15 trillion as of today. But now, on the eve of the US presidential elections, any economic issue turns into a target for political bargaining and therefore cannot be resolved as easily as it used to, says President of the Neocon Expert Consulting Company Mikhail Khazin.
"The Democrats and Republicans have different views on expenses. The former think they should be increased to stimulate the economy, whereas the latter, on the contrary, point to the need of reducing taxation and expenses. Now they’ve transferred the problem into political sphere and there is no way out of this debate. The Democrats act in a rational way, using the growing expenses to compensate for the falling aggregate demand. The Republicans, in their turn, cannot waive their stand of no consent with the Democrats, which will virtually imply their defeat in this political struggle," stresses Mikhail Khazin.
From this perspective, Warren Buffett’s suggestion concerning an early payment of taxes should be taken not as a real way out of the situation but a signal of its coming to a deadlock, Mr. Khazin added.
"Buffett’s proposal has nothing to do with anything. He just suggested prepaying the taxes but this money will soon disappear from the budget."
According to a number of experts, the Republicans have chosen the wrong strategy, saying that neither a technical nor a short-term default will severely affect the economy. They even refer to it as a necessary means of toning down the Democrats and forcing them to negotiate the budget policy. But this will hardly have a positive effect on both the economy and the party’s presidential race prospects. Irina Bukina, an expert on US studies at the Institute of Economics, has her opinion on the issue:
"In general, any threats are negatively perceived by the voters. It is therefore difficult to imagine that they can help a party ensure a really stable majority of the votes. In this case, politicians are guided by more positive statements and offer various solutions," Irina Bukina said.
Any economic problems in the US may entail a crisis in global markets. Experts forecast that even a short-term default may lead to a catastrophe much more destructive than the collapse of Lehman Brothers and the financial crisis of 2008
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