President Obama held a press conference on Monday afternoon and addressed the failed results of the Super Committee to develop a new economic plan for paying down the $1.2 trillion of U.S. debt that is due beginning in 2013.
Democrats in the Super Committee had hoped that the other 6 Republicans in the committee would agree to a debt reduction plan consisting of tax increases on the wealthy in addition to the acceptance of federal spending cuts. But Republicans refused to accept the Democrats’ deficit reduction plan and showed unwillingness to accept any significant new tax increase or reduce the Bush Tax Cuts which are set to expire at the end of 2012.
Since there was no agreement from the Super Committee over debts talks, the U.S. will now follow a previously agreed default plan to attain the $1.2 trillion debt level exclusively through a series of federal spending cuts in the areas of defense and domestic spending. Six hundred billion will be cut through defense spending and the other six hundred billion will come through domestic cuts in programs such as Medicare and Social Security.
On Monday credit agencies Moody’s and the S & P indicated that they have no plans to issue a credit downgrade to the United States in the near future because the default plan remains in tact for the U.S. to meet its financial requirements of the $1.2 trillion through federal cuts with first payment due in 2013. However, if the $1.2 trillion in cuts begins to unravel or stall with no credible plan to take its place such as new tax revenues, then it is possible that another credit downgrade may follow in the future.
Some Republicans are unhappy about the $600 billion in defense cuts that are on the chopping block to meet the $1.2 trillion U.S. debt obligation over a span of 10 years. The Pentagon is already trying to come to terms with $489 billion in 10 year cuts that was slashed from their budget in August.
Another $600 billion in proposed budget cuts will stretch thin their military budget and make it even more difficult for defense contract companies like Lockheed Martin and Boeing to receive federal money for upgrading U.S. fighter jets.
Republican presidential candidate Mitt Romney recently spoke to a group of defense contractors at BAE Systems and spoke about the defense cuts. ” I would call on the president- and do call on the president- to immediately introduce legislation which says we will not hand a $600 billion cut to America’s military” Romney said.
President Obama remains steadfast that the pressure to compromise and work together in a bipartisan manner will continue to build in the months ahead through 2012. ” We need to keep the pressure up to compromise, not turn off the pressure”, Obama exclaimed.
President Obama is well aware of the mounting pressure that the U.S. faces if cracks begin to surface regarding its commitment to pay down the $1.2 trillion debt in 10 years.
“I will veto any effort to get rid of automatic spending cuts in defense and domestic programs” he insisted. President Obama appears ready to play hard ball with Republicans’ intransigence and stubborn refusal to raise any significant tax revenues. He remarked, ” There is no easy off ramp with this one.”
Before the end of 2011 in the weeks ahead, President Obama will also attempt to work together with the Republican majority Congress to approve an extension of the payroll tax cut and extend unemployment benefits to the unemployed.