Hazar Raporu - Issue 02 - Winter 2012
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14,00<br />
12,00<br />
10,00<br />
8,00<br />
6,00<br />
4,00<br />
2,00<br />
0,00<br />
-2,00<br />
-4,00<br />
the default threshold. By a last minute<br />
agreement debt ceiling was increased by<br />
$400 billion immediately and US default<br />
was avoided. However, this was just a<br />
short-term solution and there was still<br />
a big disagreement between Democrats<br />
and Republicans about how the budget<br />
deficit will be reduced. Republicans<br />
120,00<br />
100,00<br />
80,00<br />
60,00<br />
40,00<br />
20,00<br />
0,00<br />
Budget Deficit/GDP<br />
1990<br />
1991<br />
1992<br />
1993<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
20<strong>02</strong><br />
2003<br />
2004<br />
2005<br />
2006<br />
2007<br />
2008<br />
2009<br />
2010<br />
2011<br />
<strong>2012</strong><br />
Total Federal Debt/GDP<br />
1990<br />
1991<br />
1992<br />
1993<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
20<strong>02</strong><br />
2003<br />
2004<br />
2005<br />
2006<br />
2007<br />
2008<br />
2009<br />
2010<br />
2011<br />
<strong>2012</strong><br />
believe that the best way to reduce the<br />
budget deficits is to cut spending and<br />
they are against any form of tax increase.<br />
On the other hand, Democrats think<br />
that budget deficit should be reduced by<br />
raising taxes especially for high income<br />
group. At that time the final decision<br />
was left to “Super Committee” that was<br />
supposed to find a long-term solution to<br />
this problem. Normally, this committee<br />
was planning to reach<br />
an agreement on a $1.2<br />
trillion cut in spending<br />
over the next ten years<br />
that will help in restoring<br />
fiscal balances. However,<br />
again a consensus has<br />
not been established<br />
among the members of<br />
the committee. During<br />
this process Standard and<br />
Poor’s reduced the credit<br />
rating of the country and US has lost his<br />
AAA credit rating for the first time in<br />
history.<br />
Obama has been re-elected again but<br />
he is going to have a big challenge with<br />
economic situation in the upcoming<br />
days. The first problem is related with<br />
Fiscal Cliff that America<br />
is about to face in the<br />
very near term. Fiscal<br />
Cliff refers to the effects<br />
of automatic spending<br />
cuts and tax increases<br />
beginning in 2013. Tax<br />
cuts that had been put<br />
in place during Bush<br />
administration expired in<br />
2010. However, Obama<br />
by taking into account<br />
the slow economic recovery at that time<br />
extended these tax cuts for two years.<br />
Now, if the Congress does not take any<br />
action these tax cuts will expire beginning<br />
in 2013 and disposable income will drop<br />
for many American households. This will<br />
significantly harm an economy that shows<br />
a very sluggish recovery. The other side<br />
of Fiscal Cliff is related with the spending<br />
side. In order to solve the debt ceiling<br />
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