The Republican House Majority Leader John Boehner said that he is not confident at alll that he can make a deal with the Democrats on debt issues before the fiscal cliff Jan. 2, 2013. Unless a deal is reached the U.S. credit rating could be in jeopardy.
A book by Bob Woodward that examines the protracted negotiations in 2011 is just coming out. Woodward's new book is called "The Price of Politics". In it Woodward says:"When you examine the record in depth, you cannot help but conclude that neither President Obama nor Speaker Boehner handled it particularly well...Despite their evolving personal relationship, neither was able to transcend their fixed partisan convictions and dogmas. Rather than fixing the problem, they postponed it."
The problem is back again now. Boehner wants to extend the Bush tax cuts for those in the upper income brackets. This is a demand that Obama will probably not accept. As always, the two sides blame each other for the impasse. If budget negotiations fail before the U.S. falls off the fiscal cliff on January 2nd 2013 then Moody's Investors Service would probably reduce the rating on U.S. debt.
The two sides have to decide on $1.2 trillion in spending cuts and tax increases. If the spending cuts are allowed to kick in and the tax cuts expire the U.S. economy is predicted to go into recession and unemployment to increase. But it seems that Democrats and Republicans cannot ever agree on raising the debt ceiling, tax cuts, or spending cuts.
A year ago Moody's cut the outlook of the U.S. credit to negative and this was the result of last year's protracted fight over lifting the debt limit. Standard and Poor went further and actually downgraded U.S. bonds in August last year. No talks are scheduled on the issues at present. It seems that there will be no serious negotiations about raising the debt ceiling until after the November elections. Moody's expects that the U.S. will reach its debt limit by the end of the year. The U.S. has been able to continue borrowing at very low rates even though it has a huge debt load.