US Reaches Debt Limit

May 16th 2011 Deadline

By Children’s Home Society of Florida Foundation

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In February of 2010, the federal debt limit was set by Congress at $14.294 trillion. Treasury Secretary Timothy Geithner indicates that the United States will reach that debt limit on May 16th, 2011. Through various internal borrowing strategies, Secretary Geithner believes that there will not be an actual default on U.S. bonds until August 2nd, 2011. However, the Federal Government may face funding problems by late July if there is no expansion of the debt limit.

Three Sets of Negotiations

Facing a serious economic problem if the debt limit is not expanded, there are at least three sets of negotiations underway in Washington.

  • First, the “Gang of Six” Senators from both parties are still attempting to move forward with a bill that implements the recommended solution by the 2010 Presidential Fiscal Commission.
  • Second, at the request of President Obama, Vice President Joseph Biden is meeting with House and Senate leaders of both parties.
  • Finally, Senate Majority Leader Harry Reid (D-NV) disclosed this week that Senate Budget Chair Kent Conrad (D-ND) has prepared a new proposed compromise plan. The proposal by Sen. Conrad is to increase taxes in an amount equal to the budget cuts. In effect, the proposal is 50% tax increases and 50% budget reductions.

The Skeptics

Minority Leader Mitch McConnell (R-KY) was skeptical that the “Gang of Six” plan would succeed. He stated, “With all due respect to the Gang of Six or any other bipartisan discussion going on in this issue, the discussions that can lead to a result between now and August are the talks being led by Vice President Biden.”

House Speaker John Boehner (R-OH) spoke May 9th to the Economic Club of New York. He indicated that tax increases were not acceptable and that the deficit plan should instead focus on spending reductions.

In response to the comments by Boehner, White House Press Secretary Jay Carney suggested that the Speaker is “holding the US economy hostage.” Press Secretary Carney indicated that there needs to be flexibility in order to produce compromise.

Assessment

Majority Leader Reid continued the discussion later in the week and noted that it would be essential to have some tax increases. He stated that it “can’t all be done with spending cuts.

“House Majority Leader Eric Cantor (R-VA) is part of the discussion group with Vice President Biden. He indicated that he cannot disclose the specifics of the negotiations. However, in his view, House Republicans continue to support the spending reduction plan introduced by Rep. Paul Ryan (R-WI).

Editors Note: Your editor and this organization take no specific position on these comments. It is widely expected that the discussions on increasing the federal debt limit will lead to a compromise before the August deadline. The Republican negotiators continue to seek a solution that involves spending cuts. It now appears that Democratic negotiators are moving to a proposal with 50% tax increases and 50% budget reductions. Final negotiations are likely to produce a result that reduces federal spending and may include tax increases.

Conclusion

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7 Responses

  1. More on the Budget

    His budget plan under a spotlight, Ryan’s political stock takes hit.

    Rep. Paul Ryan’s political stock has taken a hit in recent weeks as his constituents, Democrats and even some Republicans have ripped his controversial budget blueprint.

    http://thehill.com/homenews/house/160713-ryan-led-with-chin-takes-hits

    Linda

    Like

  2. Secretary Geithner Warns About Debt Limit

    Treasury Secretary Timothy Geithner spoke in New York on May 17. He noted that federal debt now is at the limit of $14.294 trillion. Sec. Geithner stated, “Yesterday, we reached the debt limit and because Congress had not acted, we were forced to deploy a series of extraordinary measures to prevent default.”

    He continued that extraordinary measures will permit the U.S. to function until August 2, but after that date the nation will “no longer be able to meet our obligations.” Geithner urged Congress to fulfill the past debt commitments to seniors, veterans and others by building a “bipartisan consensus on a comprehensive and balanced fiscal reform plan.”

    Senate Budget Chair Kent Conrad (D-ND) is still holding the Senate budget proposal. He has indicated that the committee is “very close to an agreement” on a final budget proposal. The proposed Democratic Senate budget proposal is designed to include one-half revenue increases and one-half spending cuts in an effort to resolve the debt problem.

    Sen. Conrad noted that the ongoing negotiations by Vice President Joe Biden may have an impact on his plan. He also referred to the departure of Sen. Tom Coburn (R-OK) from the bipartisan panel of six senators working on a budget compromise. Sen. Conrad stated, “I’ve always been more hopeful about the Biden effort than from the Senate because it’s the only place where the President’s at the table.”

    Sen. Coburn indicated that he will introduce his own plan within the next week. His plan is expected to include a total of $9 trillion in deficit reduction. A portion of the plan may include some of the tax increases that have been discussed in the meetings of the “Gang of Six” Senators.

    Source: Children’s Home Society of Florida Foundation

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  3. Bipartisan Debt Talks on Hold

    Vice President Joseph Biden has been meeting with Republican and Democratic leaders of the House and Senate to develop solutions that reduce the deficit. The discussions have been moving forward and have “made significant progress on a blueprint for putting American’s fiscal house in order.”

    However, this week Majority Leader Eric Cantor (R-VA) and Senate Republican Whip Jon Kyl (R-AZ) stopped attending the meetings. Both indicated that Democratic negotiators had proposed a combination of both spending reductions and tax increases. The proposed tax increases were accomplished through reductions in the current tax deductions authorized under the code. These tax deductions are referred to as “tax expenditures.”

    Rep. Cantor and Sen. Kyl indicated they are open to returning to the talks if the Democratic negotiators agree to focus on spending cuts and to not include tax increases in the fiscal solution.

    Vice President Biden stated in a press release, “The only way to make sure we begin to live within our means is by coming together behind a balanced approach that finds real savings across a budget – including domestic spending, defense spending, mandatory spending and loopholes in the tax code. We all need to make sacrifices and that includes the most fortunate among us.”

    Senate Majority Leader Harry Reid (D-NV) was asked about the hold on the current negotiations. He suggested, “With what Kyl and Cantor have done, I think it’s in the hands of the Speaker and the President and sadly, probably me.”

    Editor’s Note: Finding appropriate solutions that reduce the deficit is not an easy task. It is understandable that the negotiators are facing great challenges. Because there will be very significant decisions on spending reductions, it is likely that the final decisions will be made by President Obama, Majority Leader Reid and Speaker John Boehner. The Treasury continues to emphasize that a solution must be passed by August 2nd of this year.

    Source: Children’s Home Society of Florida Foundation

    Like

  4. Deficit-Cutting Proposal Spurs Reimbursement Concerns

    The $2.1 trillion deficit-reduction proposal contained within the debt-ceiling deal that Congress will vote on imminently will target such providers for a large amount of the required savings, but they stopped short of calling for its defeat.

    “Medicare payments to providers are right back in the cross hairs,” Michael Regier, senior vice president of legal and corporate affairs and general counsel for the provider alliance VHA, said in an interview.

    The second stage of the debt deal, which directs a 12-member congressional committee to specify $1.5 trillion in cuts by Nov. 23, has caused the greatest provider concerns. Their worry stems from the plan for a “trigger” of $1.2 trillion in 10-year cuts if the committee and Congress fail to meet the initial $1.5 trillion savings goal. Those trigger cuts, according to the White House, would include up to a 2% cut in Medicare provider payments. Such cuts would ultimately impact patients, providers warned.

    Source: Rich Daly and Melanie Evans, Modern Healthcare [8/1/11]

    Like

  5. Providers Wary of Debt-Ceiling Deal

    President Barack Obama signed the debt-ceiling increase bill into law this afternoon after the deal easily cleared the Senate. Even as the compromise raced for final approval, more provider advocates and patient advocacy groups raised concerns that the bill’s savings mechanisms would likely target Medicare reimbursements.

    Some physician advocates warned about the complicated timing of the work of the deficit reduction panel, which will have to offer $1.5 trillion in cuts by Nov. 23 and secure congressional passage by Dec. 23. That is the same time frame in which Congress will need to find billions of dollars to pay for another delay of the 29.5% cut in Medicare physician reimbursements scheduled for the beginning of 2012.

    Source: Rich Daly, Modern Healthcare [8/2/11]

    Like

  6. Doctors and the debt-ceiling bill

    Although Medicaid, Social Security, and veterans’ benefits would be protected under the new bill, medical providers could see a 2 percent cut in Medicare reimbursement.

    But, that’s not all. Glaringly absent from the deal is any mention of fixing the sustainable growth rate (SGR) formula, which still calls for physicians to suffer a 29 percent cut to Medicare reimbursement on Jan. 1, 2012.

    Read more:

    http://thehealthcareblog.com/blog/2011/08/02/the-debt-ceiling-and-health-care/

    http://www.fiercepracticemanagement.com/story/debt-ceiling-deal-leaves-physicians-risk-massive-cuts/2011-08-03?utm_medium=nl&utm_source=internal#ixzz1U3rNh1bH

    Like

  7. September 2015 Update

    Currently, almost 50% of U.S. tax dollars go to entitlement programs such as Social Security and Medicare, and only 7% goes to transportation, education, and medical research, according to data collected by the Center on Budget and Policy Priorities.

    Grace

    Like

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