The American debt is significant enough to have global markets worried. Following Politics Preacher’s discussion of the debt crisis, Jason Holmes adds his cent to the debate.
There have been various discussions that country will soon have to default on government debts. Thus, the politicians and the economists have been discussing as to how to bring down the debt level and how to stop the country from defaulting. Mainly, the financial experts are of the view that the country needs a tax reform. Most are of the view that only a tax reform will result in debt reduction and thus will be able to save the nation from defaulting; the debt reduction process in itself is a Herculean task.
What are the opinions?
Not all politicians agree to the reforms in taxes. The Republicans are of the view that the government should rather try budget cuts to achieve debt reduction and avoid default. However, on the other side, the Democrats are more towards the side of raising the taxes to help in debt reduction for the nation.
The tax system used in the US is more of a flat-tax type which is more of a low-rate tax. However, Obama himself too holds the opinion that the country should try to increase the tax to address its problem with the debt situation.
The US Treasury Secretary, Timothy Geithner, said that the failure to meet the deadline of second August, 2011 is surely going to result in a serious default for the country. He is of the opinion that the default will result in some catastrophic damages to the economy in US. So, it is really important for the Congress to agree to the proposed raise in the debt ceiling of the nation.
Such a default may even result in another period of recession for the country. In the past, whenever such a situation had aroused, Congress has readily agreed to increase the debt ceiling or the borrowing limit of the nation. This time, however, the newly empowered Republicans are strictly determined to prevent any kind of tax increases and are more into seeing that some aggressive measures are being taken to reduce the budget deficit in exchange of simply agreeing to the raise in the country’s debt ceiling.
Again, after a series of discussions with the President, Mr. Geithner professed that the country is not going to default. He urged the Republican not to walk away from making a large decision about the debt reduction for the country. The tax discussions include hikes in taxes, and more so to close down any kinds of tax loopholes for the wealthy Americans. The White House is not going to make any small decisions about national debt without making changes to taxes. The arrow is mainly pointed towards those people who have the ability to pay their taxes in spite of the others facing problem with their finances.