There are two traditional ways to solve sovereign debt default: the defaulting country borrows from the World Bank or the International Monetary Fund; Negotiate with creditor countries on debt interest rate, repayment time and principal.
Causes of the crisis:
On October 2011May 16, US Treasury bonds finally hit the upper limit allowed by Congress 14.29 trillion US dollars.
The outbreak of the international financial crisis has greatly increased the deficit of the American government, making it a common practice to borrow money to live, and the national debt record has hit record highs. As of September 30, 20 10, the balance of US federal government debt was 13.58 trillion US dollars, accounting for about 94% of GDP, and exceeded 14 trillion US dollars by the end of the same year. 20 1 1 February 22, 2008, when the balance of available bonds was only 21800 million dollars, the US Congress failed to reach an agreement on raising the ceiling. Finally, in May of 20 1 1, US Treasury bonds peaked, creating a record high of 14.29 trillion US dollars.
Faced with this situation, US Treasury Secretary timothy geithner is worried. He said that due to some emergency measures to maintain the ability to borrow, the US government can delay the payment until August 2, 20 13 at most. By August 2, 20 13, if the government does not raise the debt ceiling or cut spending, it will start to default on its debts and be unable to repay the principal and interest of American bonds, which may throw the international financial market into chaos.
Current master scheme:
Any plan must be approved by a majority vote of both houses of Congress and signed by the President before it can be successfully promulgated. There are 435 seats in the House of Representatives, 240 seats in the Party and 0/83 seats in the Democratic Party/KLOC. The Democratic Party holds 53 seats in the Senate and 47 seats.
The main plans we saw in the discussion are different, which reflects that the demands and ideas within the two parties may be inconsistent to some extent. For example, the benchmark proposal discussed: Reid and Bona's position is actually a moderate within the party.
For the sake of government operation and campaign theme, Obama tried his best to avoid drastically reducing the expenses of his campaign card, the universal health insurance plan. Obama's plan only proposes spending cuts of $65,438 +0.65 trillion, of which $65,438 +0 trillion is still spent on domestic and national defense, and it also proposes an increase in government taxes of $65,438 +0.2 trillion, which is obviously unacceptable to * * * and the Party.
The six-person gang scheme: tax increase is unacceptable to both the party and the party.
The proposal of the Democratic Party and Democratic senators to form a "six-person gang" was appreciated by Obama. On the one hand, this plan has a large-scale deficit reduction, on the other hand, it also supports tax increase. But in fact, this bipartisan proposal does not represent the mainstream understanding of the two parties, especially the $65,438 +0 trillion tax increase, which makes it difficult for the vast majority of * * * and party member to agree.
McConaughey's backup plan: ingenious non-mainstream
It is strange that Senate Democratic leader Reid and Senate Democratic leader McConnell jointly put forward a backup plan. Not only did it not ask the Obama administration to increase taxes, but it did not actually force the Obama administration to cut spending. Just ask him to submit a bill to Congress for a vote on spending cuts.
More subtly, once the plan is established, Obama only needs one-third of the votes in both houses to raise the debt ceiling. This gives * * * and party member the right to oppose the bill (such as Obama's possible tax increase). ) and explain to voters, while protecting national interests from default.
But this compromise is not recognized by the mainstream of the two parties. First, the plan will be divided into three stages. Obama will propose a spending reduction plan for Congress to vote on, which makes the Democratic Party very passive in the election. Second, this plan has very weak requirements for the government to cut spending, which makes * * * and party members dissatisfied. More than 70 * * and party member jointly issued an open letter, clearly expressing their opposition to the McConaughey plan. In addition, the intensity of deficit reduction in the plan may not reassure rating agencies.
Therefore, this so-called backup plan, the two houses and President Obama may not pass. Even if it passes, the market will still be worried about the solvency of the United States and the AAA rating of its national debt.
Reid plan: deficit reduction is too weak
Reid's plan belongs to the compromise faction of the Democratic Party. This plan does not include any increase in government revenue, which is unacceptable to mainstream Democrats. On the other hand, the scale and intensity of Reid's spending cuts have made the mainstream and Republicans dissatisfied. Like McConnell's plan, even if this plan is passed by the two houses and the president, it may still make the market and rating agencies worry about their future solvency.
Bona Plan: Let Democrats have no bones in their throats.
Bona's plan is based on the "contraction, restriction and balance" plan that has been rejected by the Democratic Senate.
This is the most thorough demonstration plan of the Democratic Party. On the one hand, the plan is divided into two stages, that is, giving the Obama administration a debt line of 1 trillion dollars, but only reducing government expenditure and not increasing government revenue. In the second stage, we will continue to cut government spending on a large scale, and at the same time put the voting time in the 20 12 general election year. In addition, the first step of this plan is only a short-term transition plan. Even if the vote is passed, the voting result of the second step of the plan is still uncertain, and the default risk of US Treasury bonds still exists in the future, and rating agencies may still downgrade its rating.