Monday, August 1, 2011

Debt Ceiling Deal: Almost No Spending Cuts Before 2014

From The Huffington Post:
The first phase of a deal to raise the government's borrowing limit would pose little threat to the economy in the short term because almost none of the spending cuts would occur before 2014...

Discretionary spending, which excludes Social Security, Medicare and Medicaid, would be cut by $21 billion in 2012 and $42 billion in 2013, according to an analysis by the Congressional Budget Office...

"[M]ost of the cuts" have been put off for several years...

The deal comes as the U.S. economy is worsening. Manufacturing activity dropped to its lowest level in two years, according to a survey released Monday...

And economic growth dropped below 1 percent in the first six months of this year, the government said last week, much weaker than economists had expected. Government spending fell for a third straight quarter, contributing to the slower growth...

The sluggishness of the economy has raised concerns that it could slide back into recession...

The deal enables the government to avoid defaulting on the nation's debt. Credit ratings agencies may still downgrade their ratings of U.S. debt...

There's little in the package that would promote growth, many economists said. And some measures that were intended to stimulate the economy are slated to expire at year's end...

[E]xtended unemployment benefits....will be difficult to extend...

[C]uts in federal spending and the end of the tax cut could reduce growth by about 1.5 percentage points in 2012.

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