Morning Brief: Debt Ceiling Battle Looms

Reuters discusses yesterday’s White House meeting, where President Obama and Speaker Boehner argued over what provisions could be attached to the next debt limit increase, expected in early 2013. Boehner wants spending cuts and reforms larger than the amount of the debt ceiling hike, while Obama wants to separate the debt limit from the budget. The Washington Post summarizes the political considerations and how automatic actions such as the spending cuts from the last debt ceiling vote and the expiration of the Bush-era tax rates would reduce the deficit.

Earlier this year, CFR’s Edward Alden discussed the CBO report on the budget impact of current legislation if Congress does not act. While he states that no action would be bad policy, he suggests that Congress take the current law as a budget baseline.

Herd of Big Money Bond Bulls Thins

Despite their strong performance in 2011, few influential money managers and investors advocate buying U.S. government bonds, and many are now urging a switch back to stocks (Reuters). As investors allocated more money to U.S. Treasuries, bond prices rose, driving yields to record lows, and lowering the cost of financing the federal deficit. Despite the expert opinions, many retail investors continue to buy U.S. Treasuries as a bulwark against uncertainty caused by everything from Greece’s potential exit from the Euro to JP Morgan Chase’s recent $2 billion loss.

As the United States continues to run budgets with high deficits, politicians debate different plans to reduce government costs and to raise revenue. This CFR Backgrounder by Jonathan Masters outlines the competing policy paths on federal fiscal reform, and the global consequences for failing to bring down U.S. debt.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.