For World's Sake, Obama
Must 'Provide Leadership' on U.S. Debt
"Given
the complicated politics of the presidential election, we wonder whether the
two sides will be able to agree on effective measures to cut the deficit. … The
president must provide leadership and get the U.S.' fiscal house in order. Both
houses of Congress also have a very grave responsibility."
Chairman of the House Budget Committee Paul Ryan: Still licking his wounds from criticism following the release of the "Ryan Budget," the apparent victory of the Tea Party in debt ceiling talks has given added impetus to he and the rest of the U.S. Republican leadership.
President Obama has reached
an agreement with Republican and Democratic leaders to raise the debt ceiling
of the U.S. government. The U.S. federal debt was projected to reach its statutory
limit of $14.3 trillion (about ¥1.1 quadrillion) on Tuesday. We welcome news
that a last-minute compromise has been reached and that the worst-case scenario
of default on U.S. Treasury bond payments avoided.
Should the U.S. government
fall into default, market confidence in the world's key currency, the dollar, would
plunge. U.S. Treasury bonds held by major countries and financial institutions
around the world would then plummet, throwing financial markets into major
turmoil.
Apparently out of a sense of
relief, dollar-selling pressure on foreign currency markets has eased, halting
at least temporarily the recent sharp appreciation of the yen against the
dollar. Stock prices on the Japanese and other Asian markets rose across the
board. Further stability in the financial markets would be desirable.
According to Obama, the
agreement includes deficit reductions of $2.4 trillion over 10 years, while
allowing the administration to raise the debt limit on a similar scale in two
stages.
Initially, spending cuts of $900
billion would be imposed while the debt ceiling is raised by the same amount. Then
a bipartisan "super committee" to be established by Congress will
work out a plan to cut the deficit by another $1.5 trillion within the year, while
again raising the debt limit by a matching amount.
On the basis of the accord, both
houses of Congress should pass the bill quickly and Obama should sign it into
law. From now on, the focus should be on the new bipartisan committee and its
deficit cutting plan.
The Tea Party wing of the
Republican Party which made a breakthrough in last year's midterm elections, opposes
tax increases. With the president seeking both to cut fiscal spending and raise
taxes, the Democrats and the Tea Party are far apart.
Given the complicated politics
of the presidential election, we wonder whether the two sides will be able to
agree on effective measures to cut the deficit. The pros and cons of tax increases
will likely become a major bone of contention.
Posted
by WORLDMEETS.US
If negotiations devolve into acrimony
with Republicans and Democrats locked in a tug-of-war - or if deficit-cutting
measure end are judged insufficient - credit-rating agencies may still decide
to downgrade U.S. government debt - raising fears of the impact on world
markets.
The president must provide
leadership and get the U.S.' fiscal house in order. Both houses of Congress
also have a very grave responsibility.
Meanwhile, the appreciation of
the yen continues, with the currency in record ¥76 yen to the dollar territory,
causing hardship for the Japanese economy.
The yen's rise puts pressure
on the earnings of exporters, hindering Japan's economic recovery. If Japanese
firms accelerate overseas production abroad to cope with the yen's rise, it
would bring about a hollowing-out of Japanese industries.
We hope Japanese companies
will maintain domestic production and work out strategies to deal with the super-strong
yen. The government should expand its support.
