August 2 (Bloomberg) - the agreement reached by the Congress of United States to raise the ceiling of the debt of $ 14.3 trillion has spared an immediate catastrophe to potentially establish a route to disaster long-term to the nation.
The initial euphoria in financial markets about the contract quickly faded. The index of S & P 500 U.S. stocks declined for a sixth day, losing the Monday of 0.4 per cent to close at 1,286.94. The dollar gained against the euro and the yen but declined to a record low against the Swiss franc.Market response highlights a sad reality: while the Government avoided a self-inflicted disaster, it has not resolved the basic problems and appears to have created new ones. United States need is a plan to reduce the deficit to tackle its fiscal gap in the long term without a weight too in a weak recovery.On the other hand, is more the opposite: immediate cuts that threaten the recovery in the short term but are not important enough to solve the problems for long-term spending budget.Under the agreement the Parliament approved on Monday, the Government should look for cuts of $ 21 million in spending again next year and possibly much more. If legislators are not according to later this year in at least $ 1.2 billion in the largest reduction in the deficit, the country will face indiscriminate cuts in domestic and defense programs.The cuts could hinder the recovery, particularly in view of 250 million dollars in unemployment benefits expire, the end of the temporary Court of taxes from payroll and the reduction of the stimulus program. The growth was barely evident in the first half, and a report from manufacturing on Monday showing a strong decline in activity and hiring plans in July.A growth of economy is crucial to the setting of the finances of the Government. Economic production is the denominator in the debt burden of the Government of United States, which is currently almost 100 per cent of the gross domestic product, according to the International Monetary Fund - the highest since then in the Mundial.Incluso War II level if the economy does not falter in the cuts, the agreement provides future deficit reduction too shortly to put Government finances in a way sustainable and possibly too little to maintain its AAA credit rating. Economists estimate the United States structural budget deficit--the gap should be closed to ensure the long-term stability - in about 5 to 6 percent of GDP. The $ 2.4 trillion in deficit reduction envisaged in the compromise plan amounts to 1 percent of GDP projected for the next decade.Let us not deceive ourselves: United States is a rich country that can solve their budget problems. Closing the fiscal gap will require political leaders to adopt more ambitious policies and build popular support for the sacrifices that implies. These tasks will only be more painful if the markets finally force in us.Bold measures--including the revision of rights, rethinking the only dysfunctional United States tax code and considering a federal VAT - should be on the table. In an estimated 30.5% of GDP in 2011, the total tax burden of the Americans is the lowest among the Group of seven industrialized nations.In addition to fiscal restructuring, United States needs political renewal. The debt ceiling was raised in a greenhouse of ideology and flourished into a storm of political machinations that put the nation at risk. Having held successfully the hostage of the economy to achieve its objectives, the House Republicans established a template for the partisans aggrieved, unwise and difficult for any future Congress. The danger did not end with the vote on Monday.The resulting agreement is almost totally uninformed by the real economy, demographic trends or social reality of the nation. In addition to stagnant economic growth, have an ageing population and rising inequality, with approximately one third of the wealth of the country controlled by 1 per cent of the citizens. The agreement amounts to complete denial of these for our political leaders.Includes President Barack Obama, who has ignored the dangers in the long term the deficit in its budget and which not, inexplicably, according to the sensible suggestions of its own Commission to reduce the deficit. The Congress Committee charged under the new contract of debt of the additional budget savings discovery is unlikely that produces nothing comparable bold or intelligent.This agreement is a bipartisan and unholy mess. But you have to stop working. Congress should use the breathing room provided to seek creative long-term reforms fiscal focus not only on preventing crises - but on the creation of a Government that is smarter, fairer and more innovative. Done the right way, the boring work of budgeting can be a national uplifting experience. We have clearly seen what happens when the wrong way.-Editors: Mark Whitehouse, Timothy Lavin
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