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Entries in Debt Ceiling (32)

Tuesday
Jan082013

New Wrinkle in Looming Debt Ceiling Battle

Stephen Chernin/Getty Images(WASHINGTON) -- The fight over whether to raise the debt ceiling, which is already on the fast track, may have to get on a faster track.

An analysis by the Bipartisan Policy Center now predicts that the government won't be able to pay its bills by as soon as Feb. 15.

That's two weeks earlier than originally projected and the White House has warned GOP lawmakers that if the debt ceiling isn't lifted above the $16.4 trillion statutory limit, the government will default on its debt.

Republicans say that any increase will have to be matched with equal spending cuts -- a position President Obama finds untenable.

The Bipartisan Policy Center says that since Dec. 31, when the statutory limit was reached, the Treasury Department has used "extraordinary measures" to postpone default.

Copyright 2013 ABC News Radio

Friday
Jan042013

Trillion Dollar Coins: The Ultimate Debt Ceiling End-Around?

DC Productions/Thinkstock(WASHINGTON) -- With President Obama having kicked off debt ceiling negotiations by vowing not to negotiate over the debt ceiling, a new option for paying off the nation’s considerable tab is gaining some momentum.

It goes like this: Should Congress fail to extend the U.S. debt limit -- reached again on Dec. 31 -- the president could ask the Treasury to begin printing trillion dollar coins, a number of which could then be put toward fulfilling debt obligations in the event new legislation stalls in Congress.

While there are laws in place to regulate how much paper, gold, silver or copper currency can be circulated by the government, there is nothing so clearly stated when it comes to platinum.  That door open, the Treasury could have the U.S. Mint melt and mold a few trillion dollars of it, then ship it over to the Federal Reserve for safekeeping until the time comes to pay the bills.

The more difficult part comes sometime after the decision is made to coin the platinum and before the Mint gets to work in sculpting the pieces.

At that point, the American people must decide whose face will adorn the trillion dollar trinket.  The process to determine the “specs” of the coin, U.S. Mint Public Affairs Specialist Genevieve Billia warns, must be “determined by legislation,” creating the potential for another congressional impasse.

Copyright 2013 ABC News Radio

Thursday
Jan262012

Senate OKs Rise in Debt Ceiling

Architect of the Capitol(WASHINGTON) -- The  debt ceiling will rise once again -- this time by $1.2 trillion -- after the Senate Thursday blocked a resolution that would have denied President Obama an increase. The increase is enough to keep the government running and paying its bills through November 2012.

This increase would raise the U.S. government’s credit limit to $16.394 trillion. According to the U.S. Bureau of Economic Analysis, the current U.S. gross domestic product sits at $15.176 trillion.

And although it may appear, and Sen. Kay Hutchison, R-Texas said Thursday on the Senate floor, that the debt was at more than 100 percent of the current U.S. GDP, according to the Office of Management and Budget, the outstanding debt held by the public is currently estimated at 72 percent of the GDP.

The only time the U.S. has owed more than it took in was during 1945 and 1946.

Congress had 15 days following the president’s request to increase the debt limit to vote on a resolution of disapproval, as per the Budget Control Act passed by Congress last August.

The resolution, which passed the Republican-led House of Representatives last week, was voted down Thursday by the Senate by 52 to 44, with four GOP members not voting.  Even if the Senate had passed the resolution that would have denied the debt ceiling increase, it was expected that the president would have vetoed it.

With only one Republican, Sen. Scott Brown, R-Mass., voting with Democrats to filibuster the motion, Republican senators upheld Senate Minority Leader Mitch McConnell’s promise of sending “a simple message to the White House: No more blank checks.”

“Washington needs to start spending less than it takes in,” McConnell, R-Ky., said. “And our future will always be uncertain and our economy in danger as long as the president fails to lead on this crucial issue.”

Sen. Tom Coburn, R-Okla., one of many Republicans to speak in favor of the resolution, said it was no wonder Americans were “disgusted with Congress.”

“A debt limit doesn’t mean anything in this country, because every time we come up to the debt limit, what we do is just pass it rather than the things the American people have asked us to do,” Coburn said. “Shouldn’t we come together as men and women, Americans, not Democrats and Republicans, and say we’re going to do what we can do to assure the future of this country and quit thinking about the next election?”

Coburn added that “we ought to be doing what is needed. It’s called making priorities.”

Sen. Richard Durbin, D-Ill., said he agreed with Coburn’s call for bipartisanship and reining in the debt, but differed on how to go about it.

“What troubles me greatly is many of the same senators who are going to vote against the debt ceiling voted for the spending,” Durbin said. “They voted to spend the money knowing we didn’t have it....Don’t vote for the spending if you won’t vote for the borrowing, because we know now they are linked together.”

Two Democrats,  Sens. Joe Manchin, D-W. Va., and Ben Nelson, D-Neb., voted with Republicans to deny President Obama an increase.

Copyright 2012 ABC News Radio

Wednesday
Dec282011

Obama to Request Another Debt Ceiling Hike

Stephen Chernin/Getty Images(WASHINGTON) -- With the federal government now coming within $100 billion of the current $15.2 trillion ceiling, President Obama is expected to request an increase this week as he wraps up his family vacation in Hawaii.

Before he returns to Washington next week to face a grueling re-election campaign, Obama will ask Congress to raise the debt ceiling by $1.2 trillion to $16.4 trillion.

The latest hike request comes after a heated debate in Washington this past summer over the same topic.  Lawmakers eventually came to an agreement to increase the debt ceiling in August but the back-and-forth led Standard & Poor's to downgrade the nation's credit rating from AAA to AA+

This time around, it would take both the House and the Senate to oppose raising the borrowing ceiling, but that probably won't happen given that it's an election year and the public is discontent with Congress.

Copyright 2011 ABC News Radio

Thursday
Sep082011

Starbucks CEO: 'We Can't Wait for Washington'

Mario Tama/Getty Images(NEW YORK) -- Starbucks CEO Howard Schultz, who recently made a call to action for his "fellow concerned Americans" to boycott campaign contributions, said it is up to U.S. business leaders to help get the country out of its "crisis of confidence."

"We can't wait for Washington," he said.  "Business leaders are going to have to galvanize their own constituencies and do everything they can to demonstrate confidence in the economy, and I think that can be contagious."

In an interview with ABC's Nightline, Schultz talked about his loathing of Congress and the administration in, what he called, the "tragic conclusion" of the debt ceiling deal.

"I don't recognize what's coming out of Washington," he said.  "I'm just asking in the most respectful way.  You took an oath of office, all of you, to represent America, not ideology, not one constituency over another.  We have serious problems right now."

He added it was U.S. business leaders' "responsibility" to help increase consumer confidence, especially through job creation.  For his own company, Schultz said, he plans to remodel 1,700 Starbucks stores in the next year, and try to open up 200 new stores.

But the lack of a long-term agreement on the debt ceiling deal -- Congress and the administration still need to agree on $1.5 trillion more in budget savings by the end of the year -- is a direct link, he says, to the faltering economy.

"Most business people today are not going to invest in the uncertainty that exists in America," he said.  "That uncertainly is directly linked to the debt ceiling."

A registered Democrat, Schultz wouldn't openly criticize President Obama or any specific member of Congress, but said there was a disconnect between Washington and the needs of the U.S. people.

"My biggest concern is that America is drifting towards mediocrity and that people don't recognize -- and by people I'm meaning Washington -- don't recognize the sense of urgency and the fact that I don't think this is a crisis anymore.  I think it's an emergency," he said.

The Starbucks CEO said his campaign started with a call-to-action memo to his 200,000 employees and 50 other CEOs, which, he said, sparked encouragement for him to keep going.

He then officially launched his campaign in August with full-page ads and his website, Upwardspiral2011.org, calling upon people to boycott any further political contributions until the national deficit is reduced, as first reported by The New York Times.  Schultz held a teleconference Tuesday night, where he said 130,000 people participated in a discussion about issues with the economy.

Schultz said 140 CEOS have now joined his pledge.  They include CEOs from the NASDAQ, AOL, J.C. Penney and the New York Stock Exchange.

Copyright 2011 ABC News Radio

Wednesday
Aug102011

'You Should All Be Fired': Mom Flies Banner Over Wall St.

Jupiterimages/Thinkstock(NEW YORK) -- A Midwestern mother and investment banker who was livid with Washington lawmakers paid for the banner that soared above Wall Street on Tuesday reading "Thanks for the Downgrade. You Should All Be Fired."

Lucy Nobbe, a single mother of two from Kirkwood, Mo., decided to have her rage flown in the face of Wall St. workers themselves when she hired a plane to tow the banner over downtown Manhattan, according to local television station KSDK. She originally intended for the banner to soar over Washington, D.C., but discovered that there's a no-fly zone over the capital.

"I chose Wall Street instead, but didn't specifically intend it to fly over S&P. I'm just a mother from St. Louis who feels the only reason we got downgraded was people in politics," she told Fortune.

"I thought that is something that I could do that wouldn't cost a million dollars and maybe someone would listen to me," Nobbe told KSDK. She said she couldn't stop thinking about how angry she was with lawmakers over the debt-ceiling bickering.

She called the company flysigns.com, which told her it wasn't possible to fly over Washington. "She asked me where would it be effective, and I said, 'Let's take it to Wall Street,'" said Justin Jaye, who owns the L.A.-based company.

He said he backed Nobbe 100 percent and offered to do the job for $895 instead of the usual $1,200 to $1,500.

"Everybody supports what she's doing. We wanted to pitch in and make it affordable for her," Jaye said.

The reaction has been overwhelming, he said. He's flown thousands of banners in 20 years in the business, and "not one has struck a chord...as much as this one."

Nobbe's daughter, Holly, told the station she was glad to have a mom who stuck her neck out. "She definitely stands up, she is different than other moms, she stands up and I'm really proud of her," Holly said.

A friend told The Observer that Nobbe was not wealthy. "She's been working and paying taxes since she was 16 years old," the friend said.

The banner was first reported by an American banker who tweeted: "An airplane just buzzed past the S&P office in Lower Manhattan pulling a banner: 'Thanks for the downgrade. You should all be fired.'"

Copyright 2011 ABC News Radio

Tuesday
Aug092011

Consumer Reports Index: Sentiment Falls to Lowest Level Since 2009

Comstock Images/Thinkstock(YONKERS, N.Y.) -- August’s Consumer Reports Index -- a measure of overall consumer sentiment -- fell to its lowest level since December 2009 in the wake of Washington’s indecision surrounding the debt ceiling debate.

The index dropped to 43.4, down sharply from July’s 48.5. The figures are representative of the percentage of people who say they were financially better off versus worse off than they were in 2010.

“The Consumer Reports Index shows no clear signs pointing to an economic recovery any time soon,” said Ed Farrell, director of the Consumer Reports National Research Center.  “Too many households are feeling financial pain and more jobs were lost than created.  Unfortunately, the burden of this bad economy has fallen on the households that earn less than $50,000 a year.  They’re the ones having trouble finding new jobs, paying bills and affording health care.”

The Consumer Reports Index report comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index and the Employment Index.

Copyright 2011 ABC News Radio

Thursday
Aug042011

Six Ways to Profit from the US Debt Crisis

Medioimages/Photodisc(NEW YORK) -- The same crisis that gave grey hair to Congressmen is creating new profit opportunities for investors, say financial strategists.

Thanks to continuing U.S. debt woes, now may be the best time to get a fixed-rate, 30-year mortgage; or the best time to invest in the stocks of U.S. companies that export. It's a good time to bet against U.S. treasuries and to put money into currencies that are likely to outperform the dollar.

On Wednesday, the dollar fell on worries that credit rating agencies may yet downgrade U.S. debt, despite the debt-reduction bill passed by Congress and agreed to by the White House earlier this week. Two reports issued Wednesday—one on U.S. factory orders, the other on the U.S. service sector—gave more bad news, suggesting that already-anemic U.S. economic growth is slowing.

Yet this bleak economic news is creating investment opportunities in several categories:

Home Mortgages. The fact that the yield on 10-year U.S. Treasury notes has plunged is good news for anyone looking for an affordable a home loan, since mortgage rates and 10-year treasuries typically move in tandem.

U.S. Treasuries. Worried that treasuries will decline further? You can invest in a mutual fund that goes up when treasuries go down. These allow investors, in effect, to bet against U.S. debt.

Foreign Currencies. If the U.S. dollar continues to decline, Tom Lydon, editor and publisher of ETF Trends, suggests investors consider a fund pessimistic about U.S. currency. Example: The PowerShares DB US Dollar Bearish Fund, which rewards investors when the dollar weakens in relation to the Japanese yen, the British pound, the Canadian dollar, Swiss franc and Swedish krona. Alternatively, investors can simply buy those currencies directly.

Axel Merk, manager of the Merk Funds, which include the Merk Hard Currency Fund, thinks it makes more sense for an investor to buy a basket of currencies rather than the currency of any one country (Singapore, for example, whose strong economy and positive trade balance have made its dollar a star performer).

"Having a basket," he says, "mitigates the risk. We like the countries whose central banks are printing less money than the U.S. and whose governments are spending less." Merk's basket includes some of the currencies named above, plus the New Zealand dollar and the Australian dollar, as well as gold.

Copyright 2011 ABC News Radio

Tuesday
Aug022011

Moody's and Fitch Affirm AAA US Rating

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- U.S. stocks continued to slide Tuesday in part on concerns about the global economy, before Moody's affirmed its AAA rating on U.S. sovereign debt but lowered its outlook to "negative." Earlier in the day, Fitch Ratings also affirmed its AAA rating. Economists are now waiting to see if Standard and Poor's will follow suit or downgrade the nation's credit rating.

The Dow Jones Industrial Average dropped 266 points, or 2.19 percent, to 11,867 at the end of the day, while the S&P 500 fell for the seventh straight day, down 2.56 percent to 1,254. It's the S&P's longest slump since 2008.

On Tuesday, the Senate passed an agreement to raise the debt ceiling and avoid a default on U.S. debt, following passage in the House on Monday evening.

"The initial increase of the debt limit by $900 billion and the commitment to raise it by a further $1.2-1.5 trillion by yearend have virtually eliminated the risk of such a default, prompting the confirmation of the rating at Aaa," Moody's stated in a report.

Moody's assigned negative outlook to its rating, saying it could downgrade the U.S. if fiscal discipline weakens in the coming year, further "fiscal consolidation" does not take place in 2013, the economic outlook "deteriorates significantly," or there is an appreciable rise in the government's spending "over and above what is currently expected."

Fitch Ratings confirmed its AAA rating for United States debt over the short-term, but warned of more tough choices coming soon.

"While the agreement is clearly a step in the right direction, the United States, as in much of Europe, must also confront tough choices on tax and spending against a weak economic back drop if the budget deficit and government debt is to be cut to safer levels over the medium term," Fitch said in a statement.

Before Moody's and Fitch's reports were released, traders were focused on a morning report which showed American consumers were spending less during June, the biggest one month drop since 2009.

Copyright 2011 ABC News Radio

Tuesday
Aug022011

Dow Dips: Fears over Global Economy Overshadow Debt Deal

Comstock/Thinkstock(NEW YORK) -- U.S. stocks continued to slide Tuesday in part due to concerns about the global economy, despite the Senate approving the debt limit deal before 1 p.m.

The Dow Jones Industrial Average dropped 159 points at 1:39 p.m. to 11,969, while the S&P 500 fell for the seventh straight day, down almost 20 points to 1,267.19. It's the S&P's longest slump since 2008.

Nick Kalivas, vice president of financial research at MF Global, attributed the drop in part to a continuation of news showing a lowered economic outlook.

On Monday, U.S. financial markets were first buoyed by the news of a possible debt limit deal in Washington, but slid after a report on manufacturing showed weak progress for the economy. It was followed Tuesday by the possibility of renewed fear of spreading sovereign credit stress in Europe, and concerns that China could raise interest rates; both weighed on stocks.

Kalivas said stocks in the health and defense sectors have fallen due to their exposure to federal budget cuts announced in the debt deal.

"If there's a trigger and they have to institute defense and health cuts, it will likely cut providers not people who receive the benefits," Kalivas said. "It's a sign the regulatory environment may be difficult for the healthcare and pharmacy industries."

Concern has arisen over possible cuts to Medicare and Medicaid spending.

Fitch Ratings, one of the three major credit agencies, confirmed its AAA rating for United States debt over the short-term, but warned of more tough choices coming soon.

"While the agreement is clearly a step in the right direction, the United States, as in much of Europe, must also confront tough choices on tax and spending against a weak economic back drop if the budget deficit and government debt is to be cut to safer levels over the medium term," Fitch said in a statement.

Copyright 2011 ABC News Radio







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