US Agreement-They did not let go. After a stormy weekend, the Democratic president Barack Obama camp and the Republicans, led by John Boehner, still opposed to a protracted standoff without reaching an agreement to bring the country from the threat of default . However, the fateful date of August 2 approaches. That day, as they have already exceeded the total limit of 14.294 billion dollars of debt, the United States can no longer borrow. Not to fall into a default, we must quickly find the money. Solutions? This is where the two parties can not agree. U.S. President offers a plan to reduce the deficit of 4,000 billion over twelve years, through tax increases and budget cuts. Unthinkable for Republicans who plan, meanwhile, 6,000 billion in cuts over ten years with the privatization of the Medicare health program, for the poor. And if a dialogue of the deaf seems to have begun between the two parties, it is necessary to reach consensus as quickly as possible, because the scenarios for the United States but the world is sometimes reassuring sometimes alarmist.
Consequences If No Decision Until August 2
Without agreement on August 2, the federal government would be unable to borrow to pay its debts. Some parts of the U.S. administration should be closed so that the government pays its creditors. This is called a shutdown: the public sectors that are not essential (museums, national parks …) are closed and employees laid off technique.
For the economy, the damage is extensive: the loans with government support are suspended. Tourism is also strongly affected, since visas are no longer issued and that the monuments become inaccessible. More locally, the District of Columbia, the state which is the capital, Washington, will run at idle, since that is where the main focus of federal officials.
The final shutdown in 1995, had cost $ 800 million to the taxpayer. But the economy will pay a heavier toll: according to the firm IHS Global Insight, it would be 0.25 percent of GDP a week off. While the recovery remains fragile, the United States can ill afford such freedom.
Impact To The World
For now, the markets do not seem particularly worried. Less feverish than the European crisis anyway. A few days before the deadline, they seem to trust the American pragmatism and believe that an agreement - even late – will be sealed between Republicans and Democrats. But another danger threatens the United States and, by extension, the rest of the world: the deterioration in the rating of U.S. debt by the rating agencies. Standard & Poor’s has threatened to do this if Washington failed to plan a reduction of 4,000 billion. The consequences of such degradation are difficult to measure. Many speak of earthquake, explosion, global economic disaster like the collapse of Lehman Brothers. Alexandra Estiot, economist at BNP Paribas, this disaster scenario is exaggerated.
“One does not note down all involved and especially foreign holders of U.S. debt are not going to suddenly get rid of the dollar. “If the practical implications for the rest of the world economy seem so little real – for now – the main danger is the panic that could cause such an announcement. And the markets, panic does not bring anything good.- US Agreement
