New Financial Choices Loom Soon for US

Posted January 1st, 2013 at 4:10 pm (UTC-5)
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Even as the White House and congressional Republicans crafted an end-of-the-year tax and spending deal in Washington, they set the stage for more rancorous debate in the coming weeks over financial issues they sidestepped.

The House of Representatives on Tuesday was considering whether to give its assent to a Senate-approved measure to keep tax rates for almost all American workers at their current levels while forcing couples earning more than $450,000 a year to pay more. But even if the House votes for it, President Barack Obama and his political foes in Congress will soon face contentious financial decisions that have proven difficult to resolve in the last two years.

Foremost among them is whether to once again increase the country's borrowing limit.

The United States hit its current debt ceiling — $16.4 trillion — on Monday. Treasury Secretary Timothy Geithner says the country will be able to pay its bills for another two months, but then would need to increase the borrowing limit. Absent that, the U.S. would face an unprecedented circumstance — a possible default on some of its financial obligations.

A year-and-a-half ago, congressional Republicans reluctantly agreed to the current debt cap, but only after forcing sharp government spending cuts that were set to take effect on New Year's Day. With the economic uncertainly in mid-2011, one financial services firm cut the U.S.'s long-held, top-ranked credit rating.

But instead of compromising in the last few days on what defense and domestic programs to trim, the White House and congressional Republicans postponed the spending curbs for two months. That will leave numerous decisions — such as how much to spend on popular health care and pension programs for older Americans — for about the same time as the debt ceiling dilemma.

Then, at the end of this coming March, the government is faced with final budget decisions for the 12-month period that began last October. As last year's presidential and congressional elections loomed, the White House and Congress pushed off adoption of an annual plan and left spending at the same level as for the year that ended in September.