The battle lines are drawn. On the one side: President Obama, who refuses to link raising the debt ceiling to a plan that cuts the deficit. On the other side: Republicans in Congress who want to do just that.
On Tuesday President Obama said, "...while I’m willing to compromise and find common ground over how to reduce our deficits, America cannot afford another debate with this Congress about whether or Not they should pay the bills they’ve already racked up.”
Immediately after the press conference Republican Speaker of the House John Boehner issued a statement saying, “The American people do not support raising the debt ceiling without reducing government spending at the same time."
Time is running out. The debt ceiling will be reached sometime in February or early March. It was technically reached the last week in December but the Treasury Department has found ways to keep paying the government's bills in the meantime.
What happens after that depends on whether the debt ceiling is raised or not. Early Tuesday Fitch Ratings warned that the U.S. could lose its top credit rating if the government fails to raise the debt ceiling in a “timely manner.”
A rating cut by Fitch would be the second for the U.S. During the 2011 debt negotiations, S&P downgraded the U.S. credit rating, citing dysfunctional policymaking and a deficit plan that “falls short” of stabilizing “medium-term debt dynamics.” Interest rates, however, did not rise afterward and are lower today than they were then.
The debt ceiling is one of several deadlines that Congress and the White House need to address. On March 1 spending cuts mandated by the sequestration plan previously approved by Congress and the president take effect. At the end of March a continuing resolution passed by Congress will be required to keep the government operating.
Howard Davidowitz, chairman of Davidowitz & Associates, argues that both President Obama and Republicans need to change their mentality on the debt ceiling. The president should be open to negotiations, Davidowitz says, and Republicans should not use the debt ceiling as leverage to force government spending cuts.
Davidowitz's recommendation: Let the spending cuts already agreed to by Congress and the president take effect.
“The sequester looks like something that these dummies on both sides can actually do," he says.
Tell us what you think!
Are Congress and the president equally to blame for the deficit situation and what should we do about it?
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