The debt limit of US government has put the whole US economy in disorder and confusion. The Federal law wants Congress to approve the government for borrowing money that has to be paid for the programs passed by the Congress. The Congress is trying to raise it with votes but this limit has been raised many times. The debt ceiling became the battleground for quarrel between the Republicans and President Obama and the Democrats in 2011.
It was said by the Treasury Department in May that the debt limit has reached to $14.29 trillion but also that this would keep the government function normally by unexpected ways. The bitter talks continued by the end of July and this event seemed to be improbable which was a default made by the federal government. An agreement was announced by President Obama and the Congressional leaders of both the parties on 31st July night that would heave the debt ceiling by $2.4 trillion so as to keep sufficient borrowing till 2013. The deal also called for at least $2.4 trillion to reduce the cuts over 10 years with $900 billion in across the board cuts to be performed at once.
The agreement was approved by the House on 1st August by 269 to 161 vote which was almost unexpected. The measure was passed by Senate on the same day few hours before the Treasury set deadline. Thereafter, it was signed by Mr. Obama. According to the agreement, there will be another fight on the debt limit till 2013. The US president from any of the parties will not be allowed to raise the limit of the debts by the US people.
A last minute deal was made in April according to which the Republicans focused on the need to raise the limit of the debts thus stating it clearly that they would not agree to increase without a minimum of $2 trillion on your spending. The US economy is trying its best to recover at a slow rate.
A letter was written by Geithner to the Congressional leaders which stated that there would be debt issuance suspension period which would start from Monday after the debt ceiling will be reached. He also said that the Treasury would hit two government employee pension funds – Civil Service Retirement and Disability Fund and Government Securities Investment Fund in order to get enough cash. Geither has also said that the government may work for the debt limit for the time being. The Treasury can free up to $12 billion in two months by making new investments in some government funds and redeem the current investments so as to free up cash. Many people from both the parties were unhappy with the plan. The democrats opposed it because it cuts down their spending habits without increasing their revenues while many in the tea party were against to increase anything in the debt limit. There were many economists who complained that reducing the spending in economic crisis would help to recover the loss.
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