Ten Ways by Which Debt Deal Will Increase the Risk of Sequestration in America

 

This may look like a good thing but may cause problems for some. This may actually lead to sequestration in America. The scenario does not look very welcoming. To understand it in a better way given below are ten ways by which debt deal will increase the risk of sequestration in the US.

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1.     Military Budget

Experts predict that the extension could result in an increase in the risk that the budget cuts set for the first quarter of the year (March 1) will come into play at least for a temporary time period. Centre for Strategic and International Studies’ International Security Program’s director, David Berteau, says that this may result in sequestration as the debt ceiling issue will attract a lot of attention.

2.     Poor Budgeting

Many ask why Congress would do such a thing when it calls the shots to a great extent. Experts say this has a lot to do with the fact that other partisan parties also have a say that impact the overall result.

3.     Budget Deficit

In August 2011, there were some major problems seen in the US politics when Republicans and Democrats could not reach a deal to control budget deficit.  The problems resulted in experts predicting sequestration, which was actually to occur on the first day of 2013 itself; however, it has been delayed for now and is now expected to occur on March 1^st.

4.     Tax Issues

An idea was passed to reduce Bush tax cuts for families that make $250,000 or more. However, the idea was rejected by Democrats on the grounds that those who have the power should pay higher taxes so that government’s revenue increases.

5.     Reduction in Social Welfare

A reduction in revenue and budget deficit caused a reduction in the amount dedicated to social welfare programs such as Medicare and Social Security. This will greatly impact American citizens, especially those that are in need of such services.

6.     A Lack of Jobs

Many argued that the changes in tax will result in unemployment, which has been a major problem of the US during recession. Democrats were not in the favour of the move for this reason. They also said that the mandatory entitlement programs fostered bad values as it makes the US looks like a nation of dependency.

7.     Debt Ceiling

Failing to reach a conclusion the debt ceiling was raised by $2.3 trillion in 2011 due to the crisis. Nevertheless, the change did not really trigger anything good and the country is once again on the brim of sequestration.

8.     Bipartisan Super Committee

A super committee was created to come up with a workable solution to these problems. Conversely, it failed to do so giving rise to more problems. The recommendations given in the Simpson-Bowles report were neglected. This is considered a major blow.

9.     2012 Presidential Elections

The scenario started looking a little better, at least from the front until the 2012 Presidential Elections that once again shook things up. Congress again focused on the budget issues in order to avoid the fiscal cliff. Many are hopeful that they will be able to reach a solution soon.

10.2014 Budget

The risk makes it very difficult for the government to come up with 2014’s budget. Sequestration will result in a decrease in military spending, Medicare, non-defence expenditure and several other mandatory programs.

 

Since the government spending is an important part of the GDP, the country will face slow economic growth if sequestration indeed takes place. It is important to reduce the deficit in the long-term; however, decisions taken in such haste may actually result in bad things for the whole economy.

 

Many say that these measures look like a desperate attempt to come out of trouble and the officials should instead focus on plans that give results without jolting the economy and people. Credit card scenario will also greatly change even for a normal being.