US debate - behind the issues
Thu, 04 Oct 2012 2:42p.m.
The US economy
The job market is brutal and the economy weak. Nearly 13 million Americans can't find work; the unemployment rate is 8.1 percent, highest ever three years into a recovery. A divided Washington has done little to ease the misery.
The economy didn't take off when the recession ended in June 2009. Growth has never been slower in the three years after a downturn. The human toll is staggering. Forty percent of the jobless, 5 million people, have been out of work six months or more - a "national crisis," according to Federal Reserve Chairman Ben Bernanke. Wages aren't keeping up with inflation.
Almost every US taxpayer faces a significant increase unless Congress and the White House agree on a plan to extend a huge collection of tax cuts expiring at the end of the year. There's disagreement over whether to extend them for all or to let taxes rise for some part of the wealthiest Americans, such as individuals making more than US$200,000 per year.
There's also a big debate over how to overhaul the tax code to make it simpler, with lower rates balanced by fewer deductions. Millions of people count on the mortgage interest deduction, child tax credit and more. So finding agreement on reducing tax breaks is a titanic task, even though most lawmakers say they would like to simplify taxes.
A sea of red ink is confronting the nation and presidents to come.
The budget deficit - the shortfall created when the government spends more in a given year than it collects - is on track to top US$1 trillion for the fourth straight year. The government borrows about 40 cents for every dollar it spends.
The national debt is the total amount the federal government owes. It's risen to a shade over US$16 trillion.
There's widespread agreement that something must be done. One big question is whether to slow spending gradually, to avoid suddenly tipping the economy back into recession, or to impose steep spending cuts right away because the problem is so severe. And how should tax revenue fit into the mix?
The influence of China
The United States accuses China of flouting trade rules and undervaluing its currency to helps its exporters. That hurts American manufacturers and costs US jobs.
One response might be imposing tariffs on Chinese goods, but that could set off a trade war and drive up prices paid by American consumers.
Currently, the US is seeking international rulings against Chinese subsidies for its auto and auto-parts exports and against Chinese duties on US autos.
Many US companies outsource production to China. One study estimated that between 2001 and 2010, 2.8 million US jobs were lost or displaced to China.
Yet cheap Chinese goods have benefited American shoppers and help restrain inflation.
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