Obama says rich should pay more tax to solve US debt crisis

US President Barack Obama renews his call for a compromise in solving America's debt problem, saying it will take "shared sacrifice" for Democrats and Republicans to come to an agreement. "Simply put, it will take a balanced approach, shared sacrifice, and a willingness to make unpopular choices on all our parts," he said in his weekly radio and internet address to the nation. "That means spending less on domestic programs," the president said. "It means spending less on defence programs. ... And it means taking on the tax code, and cutting out certain tax breaks and deductions for the wealthiest Americans." The US government reached its debt limit of $14.3 trillion (8.8 trillion) in May, and since then the Treasury Department has used special measures to allow the government to keep paying its bills. But unless the limit is raised by August 2, the Treasury says, growing spending and debt service commitments will force a default, which would undoubtedly have disastrous ripple effect throughout the global financial system.

Were not Greece, says Barack Obama as US fears grow Is 'No Drama Obama' finally facing up to the scale of the US economic crisis?

Were not Greece, says Barack Obama as US fears grow President Barack Obama on Friday said only "modest adjustments" were required to overhaul the debt-ridden US economy as he insisted the country was not in the same straits as "Greece or Portugal". With Standard & Poor's and Moody's, two major ratings agencies, threatening to downgrade America's top credit status, Mr Obama tried to downplay fears about the strength of the world's largest economy, while issuing warnings to Republicans that time was running out to reach a deal on spending and borrowing. "We are running out of time, that is my main concern, and we simply need to make some tough choices," said Mr Obama. "But contrary to what people are saying, we are not Greece, we are not Portugal. We have a chance to stabilise America's finances for a decade or 15 years or 20 years if we're willing to seize the moment." Weeks of negotiations with the opposition on spending and borrowing have led to an impasse, with Mr Obama storming out of a meeting with Republicans this week declaring "enough is enough".

He needs to reach an agreement with Congress, which is partly controlled by Republicans, to raise the US government's $14.3 trillion borrowing limit in order to allow it to continue functioning.

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Failing to reach a deal by Aug 2 would leave the president with an array of unpleasant options, such as not paying pensioners or war veterans, closing courts or cutting student loans. Ben Bernanke, the chairman of the Federal Reserve, warned that such a failure would be "calamitous". He said that even if the federal government continued to pay interest to its creditors, principally the Chinese, the inability to make other payments would be a shock to the global financial system. Votes to raise the debt ceiling are usually fairly routine, but with the anti-spending Tea Party Republicans calling the shots, Republicans have insisted that the government commit to cutting the deficit before they agree to more debt. To that end, Mr Obama has agreed to cuts but wants Republicans to compromise by ending some tax breaks for wealthier Americans and corporations, which is anathema to most Republicans. The president insisted the public was on his side in wanting a "balanced approach" that would mix spending cuts and tax increases. "The American people are sold," he said. "The problem is that members of Congress are dug in ideologically." The Tea Party influence has grown considerably since last Novembers election and those new member are determined to end the ever rising spending by federal government (don't 'feed the beast' is a slogan to mean no tax increases and a freeze or better on spending). They don't care about the economy, world affairs, etc it's purely about reducing the size of government. Making a stand. Obama's frustration comes from inheriting the wars, massive debts as well as the worst recession in years, from the last Republican administration. It's as if he says 'you guys caused this, help us get out' and they say, 'we've changed, NOW we want to cut expenditures'.

In the United States those citizens creating wealth (who actually pay taxes) are unable to give the government enough money to cover its social schemes/promised obligations ( in any Socialist State the government always has more need for money than its wealth producers can provide) so it borrows money. Lots of it. I fail to see how my country isn't exactly like Greece except with more debt.The US government assumes there will always be people beyond its borders (or even a few inside) who'll be happy to print some money in exchange for another vital port or access to raw materials...and maybe there will be, but at what true cost? All this fake money-debt sloshing around will probably end up exploding into war. China has millions of young men without hope of finding wives. Don't be surprised when China decides to solve its angry frustrated single men problem and its American debt problem by declaring war. I won't be.
Americas political system isnt quirky, its dangerous The US economy is close to default, yet the parties are still playing silly games.

For the first time in its history, America is charging headlong towards a default. Dont be fooled by how unlikely this sounds: unless there is a dramatic turnaround by August 2, the worlds largest economy will have to stop honouring its debts. If it is hard not to find the idea faintly preposterous, it is only the latest episode in a farce which runs back for years. In the mid-1990s, the Clinton administration was forced to shut down parts of the federal government to keep the US economy afloat. For half of the current financial year, the Obama administration was forced to run the country on an extended incarnation of last years budget rather as if George Osborne had decided in March to reprint last years document and present it to the House. These silly episodes each derive from the same basic fact: that the worlds largest economy has a political system which is ill-equipped to manage a 21st-century economy. That it has taken a financial and economic crisis to bring this sharply into focus shouldnt be entirely surprising to adapt Warren Buffett, the billionaire investor, its only when the tide goes out that you find out whos been swimming naked. Todays dilemma is stark. There is a legal limit on the size of Americas total sovereign debt of $14.3 trillion, and with the costs of the recession still weighing down the federal budget, that ceiling is due to be hit on August 2. The letter of the law says that at that point the country simply cannot borrow more, and so must either stop financing its debt (a sovereign default) or cut internal payments. Indeed, this week, Barack Obama told CBS News that payments to social security recipients, veterans and the disabled could simply dry up on August 3. There may simply not be the money in the coffers to do it, he said. Unlike Greece or some of the other weakened eurozone states, the US is not facing default because of its inability to pay. Its overall debt levels are manageable, at least in the short term. The explanation for the crisis is purely political the Republican-controlled House of Representatives refuses to increase the debt ceiling. This is economic illiteracy of the highest degree: because the limit is an arbitrary figure, it takes no account of the size, health or spending demands of the economy. The figure which policy-makers plucked out of the sky in 1917 when they first devised this wheeze was $5 billion, which is enough to fund todays US military apparatus for all of three days.

The debt ceiling has been raised on 80 separate occasions in the past 70 years by parties on both sides of the aisle, but every so often someone uses it to hijack events and threatens to bring the economy to a halt. That was what happened to Clinton in 1995, and there are uncanny similarities today. Then, as now, a charismatic Democrat president was attempting to tax and spend; after two years in office, his party had lost control of Congress to a resurgent Republican Party; Congress refused to raise the debt limit unless spending and taxes were reduced. This time, there are two disturbing differences. The first is that sovereign debt is no longer a sideshow in the political debate its treatment can determine the economic fate of a nation. If America even feigns default, it would have terrifying consequences for the world economy. The second is that, unlike under Newt Gingrich, the Republican leader in 1995, it is far less clear that todays Republican Party knows what it is doing, let alone has a plan of action. Having managed to squeeze a half-decent deficit reduction plan out of the President, the Republicans are none the less refusing to lift the debt ceiling; many say that they wont budge unless Obama agrees not to raise taxes at all. If the likelihood is that a last-minute deal will be struck, as in 1995, there is no guarantee of that. Harvard economist Jeffrey Frankel thinks that there is at least a one-in-four chance of default. Part of the problem is that the Republican Party, a mish-mash of Tea Party extremists and more sensible deficit hawks, is still in disarray as it shuffles towards the presidential primary season. But the deeper issue is with American politics. Britain has plenty of constitutional quirks. To take one example, income tax is legally temporary: unless it is reapplied in the Finance Act each year, the government would technically be unable to collect it. But such an eventuality never comes to pass, in large part because of the assiduous work of a depoliticised Civil Service in keeping the state functioning in spite of party politics. The US political system works along far more partisan lines, meaning, all too often, that president and Congress are locked in legislative stalemate, and that real policy happens only in the two- or maybe four-year windows when White House and Congress are of the same political persuasion. In recent history, it has been easy to laugh off this mercurial approach to governing as a quirk of an otherwise extraordinarily successful nation. But with America now facing the most serious economic environment in generations, and with its global leadership under threat from rising powers, does anyone really find this silliness funny any more?