U.S.: Another Debt Crisis

The U.S. Congress has until Wednesday evening to find a solution to the explosion of debt.

On Monday, with 48 hours until the end of negotiations, the American Congress still had no solution for reducing their debt. According to some senators, it is now virtually impossible for the supercommittee responsible for the case to present the requested $1.2 trillion in savings before midnight tomorrow. Its members could even throw in the towel before the deadline. “I wouldn’t be optimistic,” summed up Republican Senator John Kyl on Monday.

It all started this summer. In early August, the U.S. had already reached the legally permissible debt limit of about $15 trillion dollars (€11 trillion, in comparison with the €1.7 trillion French debt). To avoid bankruptcy, Democrats and Republicans reached an agreement, primarily to postpone the matter to Nov. 23, appointing a committee composed of both Republicans and Democrats who would be responsible for finding $1.2 trillion in savings. To force the hand of congressional members, the agreement also provided an automatic plan, a sort of Damocles sword of budgetary discipline: If no solution was found before the deadline, the law would allow for the automatic implementation of spending cuts starting in 2013 and including up to $1.2 trillion over 10 years, which would be divided equally between defense and social programs.

Three months of discussion has not changed anything, of course: Democrats always want to raise taxes on the wealthy, while Republicans favor cuts to social programs. As a result, the automatic plan might go into action on Wednesday night. This solution doesn’t satisfy anyone. Republicans certainly do not want to touch the military budget, and Democrats are afraid of seeing their efforts to establish health insurance reduced to nothing. In either case, voters would interpret it as a sign of failure just a few months before the presidential election. This is why over the past few days some senators have been trying to cancel (without success) the automatic spending cuts, leaving the U.S. debt adrift yet again.