US debt: A deal within reach as deadline looms

20th July 2011

World markets rallied after a group of senators dubbed the "Gang of Six" unveiled a proposal that might win the support of both President Obama and the Republican opposition, says the report.

The Financial Times (paywall) reports that there was new hope that a sweeping deal to increase US borrowing authority and slash the nation's deficits by $3,700bn over ten years was within reach, after Barack Obama backed an agreement among a group of Democratic and Republican senators.

A BBC report adds that the group has been meeting on and off in recent months in an effort to craft a plan to reduce the US government's $1.5tn (£930bn) annual budget deficit.

Mr Obama said the proposal was "consistent" with a plan the White House had been urging, and called on leaders in the House and Senate from both parties to start "talking turkey".

According to the Financial Times (paywall), however, Mr Obama warned that America was still in the "11th hour" ahead of an August 2 deadline to avoid a possibly calamitous debt default.

Gelion comments on the Guardian report: "The US will only avoid catastrophe by borrowing more money.

"This whole debacle – the US, the UK and the EU being bankrupt – is down to bank debt being socialised and the tax payers of all states paying for their bankruptcies.

"Yesterday it turned out that the bankers in the UK at least are still being paid around £15 Billion in bonuses, about $20 billion. Can you believe the immorality of it as the poor and middle classes face austerity."

The group is trying to find the middle ground between the two opposing sides. It includes deficit cuts of almost $4 trillion (£2.48tn) over the decade, including reductions in spending on health programmes – but may appease Democrat concerns by guaranteeing some essential services. It also calls for $1tn of increased tax revenue, but balances this with income tax rate cuts that could find favour with Republicans.

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