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America has moved away from the brink of a catastrophic default after a deal was reached overnight to raise its debt ceiling.
Stock markets around the world rallied on Monday, in relief that the world's largest economy would probably avoid running out of cash this week. But the agreement, which includes around $2.5 trillion of spending cuts over the next decade, has been criticised by some on both sides of the political divide, and will probably not save America's triple-A credit rating.
There is also concern that the deal could still fail to be approved by Congress, which is due to vote on the package on Monday night. Some liberals are angry that the plan, which has been hailed as a triumph for the Tea Party movement, relies on spending reductions rather than tax rises to reduce the US budget deficit. The Democratic leader in the House, Nancy Pelosi, has already warned that some Democrats may be unwilling to support the deal.
Under the plan, announced by Barack Obama late on Sunday, the US debt ceiling will be raised by about $2.4tn, in two stages. In return, the US government deficit will be reduced by a similar amount over the next decade.
"This process has been messy and taken too long," said Obama, who also admitted that the weeks of frustratingly slow negotiations in Washington had not delivered the deal he wanted.
"This compromise does make a serious down-payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year," Obama said.
The Democratic leader in the Senate, Harry Reid, and his Republican counterpart, Mitch McConnell, both indicated they were optimistic that Congress will approve the deal. McConnell, who will meet with Republican senators on Monday, said: "We can assure the American people ... that the United States of America will not for the first time in our history default on its obligations."
The full details of the plan have not been released. However, a fact sheet released by the White House showed that spending would be capped by $900bn over the next ten years. A bi-partisan committee will then be set up to agree a further $1.5tn of deficit reduction measures, which could include tax rises. If this committee cannot agree a deal, then an "enforcement mechanism" will trigger around $1.3tn of spending reductions beginning in 2013.
Paul Krugman, the Nobel prizewinning US economist, accused Obama of surrendering to Republican opponents.
"The deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America's long-term deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana republic status."
Markets rally, but AAA rating under threat
Many economists believe that America could soon lose its triple-A credit rating, despite a deal being agreed. Standard & Poor's, the rating agency, recently said that a credible fiscal plan would need to include $4tn of deficit reduction measures.
"Avoiding the worst case scenario of a default on US Treasury obligations will not prevent a downgrade of the triple-A sovereign rating," predicted Kevin Daly, emerging market debt portfolio manager at Aberdeen Asset Management. "So it's time for us all to figure out just what it means when the US gets downgraded."
Stuart Gulliver, chief executive of HSBC, said the progress made over the US debt ceiling was "very welcome", but also warned that America could see its credit rating cut.
Wall Street is expected to open around 1% higher when trading begins on Monday. In London the FTSE 100 rallied by almost 1.5%, jumping 83 points to 5898, as traders welcomed the news that the US would probably not run out of cash.
"Investors have breathed a collective sigh of relief that the risk of default has been avoided – albeit a few weeks ago nobody would have expected it to go down to the wire like this," said David Jones, chief market strategist at IG Index. "It still has to be approved by Congress, so there is always the potential for a stumble here, but market reaction today seems confident that it will pass."
Most major commodities gained ground, pushing the cost of a barrel of Brent crude oil up by $2 to $119.40. Gold, which has benefited from the crisis as investors looked for safe havens, fell by 1%.
Overnight, Asian stock markets rose strongly on the news. The Japanese Nikkei was up more than 2% at one stage, closing up 1.34% at 9,965 having broken through the 10,000 barrier earlier.
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Burress deal was “all about Rex”
Posted by Mike Florio on July 31, 2011, 10:08 AM EDT
AP
So what distinguished the Jets from the Steelers, Giants, and 49ers when it came to wooing Plaxico Burress?
None of the other teams had Rex Ryan.
Per a source with knowledge of the process, it was “all about Rex” for Plaxico. Though it didn’t hurt that the one-year, $3 million guaranteed contract also represented the best financial package placed on the table, it was the total package and Ryan’s presence — and pitch — got it done.
Ryan sold Burress on the coach’s belief that Plaxico can get them over the top, just as he helped get the Giants over the top four years ago.
Though we’d previously believed the Giants were possibly kicking tires on Burress to protect themselves against criticism if he went to a team like the Jets or Eagles and became a star again, we’re told that the Giants were indeed serious.
But not as serious as the Jets.
In the end, it turns out that Burress was accurate in his assessment of his priorities earlier this month, when talking with our friends Adam Schein and Rich Gannon of SiriusXM NFL Radio.
“Well, the head coach is going to be first and foremost,” Burress said. “It’s going to be somebody to where, well, you know, he has an open door policy, I can walk in his office and sit down and talk to him whether it’s about football or life or whatever that may be. Then, of course, second, it’s going to be a quarterback. I’m a wide receiver. I mean, that’s a no brainer. I’m not going to sit here and say it’s not. And surround myself with guys that are hungry and guys that know how to play and want to win.”
On Saturday, Burress gushed specifically about Ryan in comments to Mike Garafolo of the Newark Star-Ledger. “I think he’s great,” Burress said of Rex Ryan. “He stands behind his players, I think his players have a lot of respect for him and they play hard for him. . . . He’s a great coach, great personality. He seems like he’s always upbeat.”
So the Jets have everything that Burress was looking for. And they think he gives them what they need to get what they’ve been striving for.
So instead of a formidable one-two punch at cornerback with Darrelle Revis and Nnamdi Asomugha, the Jets will unleash a potent combination of Burress and Santonio Holmes, six weeks from tonight on NBC.
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Burress deal was “all about Rex”
Posted by Mike Florio on July 31, 2011, 10:08 AM EDT
AP
So what distinguished the Jets from the Steelers, Giants, and 49ers when it came to wooing Plaxico Burress?
None of the other teams had Rex Ryan.
Per a source with knowledge of the process, it was “all about Rex” for Plaxico. Though it didn’t hurt that the one-year, $3 million guaranteed contract also represented the best financial package placed on the table, it was the total package and Ryan’s presence — and pitch — got it done.
Ryan sold Burress on the coach’s belief that Plaxico can get them over the top, just as he helped get the Giants over the top four years ago.
Though we’d previously believed the Giants were possibly kicking tires on Burress to protect themselves against criticism if he went to a team like the Jets or Eagles and became a star again, we’re told that the Giants were indeed serious.
But not as serious as the Jets.
In the end, it turns out that Burress was accurate in his assessment of his priorities earlier this month, when talking with our friends Adam Schein and Rich Gannon of SiriusXM NFL Radio.
“Well, the head coach is going to be first and foremost,” Burress said. “It’s going to be somebody to where, well, you know, he has an open door policy, I can walk in his office and sit down and talk to him whether it’s about football or life or whatever that may be. Then, of course, second, it’s going to be a quarterback. I’m a wide receiver. I mean, that’s a no brainer. I’m not going to sit here and say it’s not. And surround myself with guys that are hungry and guys that know how to play and want to win.”
On Saturday, Burress gushed specifically about Ryan in comments to Mike Garafolo of the Newark Star-Ledger. “I think he’s great,” Burress said of Rex Ryan. “He stands behind his players, I think his players have a lot of respect for him and they play hard for him. . . . He’s a great coach, great personality. He seems like he’s always upbeat.”
So the Jets have everything that Burress was looking for. And they think he gives them what they need to get what they’ve been striving for.
So instead of a formidable one-two punch at cornerback with Darrelle Revis and Nnamdi Asomugha, the Jets will unleash a potent combination of Burress and Santonio Holmes, six weeks from tonight on NBC.
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An Iranian court will likely deliver a verdict within a week in the case of U.S. nationals that have been detained for two years over espionage charges, their lawyer, Masoud Shafiei, said.
“Today’s session was the final hearing and I was given enough time to defend my clients,” Shafiei said in a telephone interview from Tehran following the court session. “We rejected both charges of spying and illegal entry,” he said, adding that he was ‘hopeful’’ his clients may be released soon.
The release of prisoners during the fasting month of Ramadan, which begins around August 1 this year, isn’t uncommon in Muslim countries. Shafiei said yesterday that Josh Fattal and Shane Bauer, the two detainees, could be released in line with “Islamic compassion” on the wake of Ramadan, according to a July 30 report by the state-run Fars news agency.
Fattal and Bauer were detained on July 31, 2009, and prosecuted for illegally crossing into Iran from Iraq. The U.S. government has said they mistakenly wandered across the border during a hiking trip and has called for their release. Fattal and Bauer’s first hearing was held in Tehran on February 6.
No Exchange
The continued detention of the two men has been another point of contention between Iran and the U.S., which accuses the Persian Gulf country of seeking to build atomic weapons under cover of its nuclear program. Iran rejects the claim and says it needs the technology to secure energy for is growing population.
In February 2010, President Mahmoud Ahmadinejad said Iran may be ready to exchange the detainees with Iranians held in the U.S. The overture was dismissed by the State Department.
Fattal and Bauer had been detained alongside a third U.S. national, Sarah Shourd, who was freed in September on bail of $500,000, with Iranian authorities citing “humanitarian” reasons. Shourd left the country immediately.
Bauer is a freelance journalist and photographer, who got engaged to Shourd while they were both in prison. Fattal is an environmentalist who was visiting Damascus before they headed to Iraq, according to freethehikers.org, a website that was set up to support their release.
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An Iranian court will likely deliver a verdict within a week in the case of U.S. nationals that have been detained for two years over espionage charges, their lawyer, Masoud Shafiei, said.
“Today’s session was the final hearing and I was given enough time to defend my clients,” Shafiei said in a telephone interview from Tehran following the court session. “We rejected both charges of spying and illegal entry,” he said, adding that he was ‘hopeful’’ his clients may be released soon.
The release of prisoners during the fasting month of Ramadan, which begins around August 1 this year, isn’t uncommon in Muslim countries. Shafiei said yesterday that Josh Fattal and Shane Bauer, the two detainees, could be released in line with “Islamic compassion” on the wake of Ramadan, according to a July 30 report by the state-run Fars news agency.
Fattal and Bauer were detained on July 31, 2009, and prosecuted for illegally crossing into Iran from Iraq. The U.S. government has said they mistakenly wandered across the border during a hiking trip and has called for their release. Fattal and Bauer’s first hearing was held in Tehran on February 6.
No Exchange
The continued detention of the two men has been another point of contention between Iran and the U.S., which accuses the Persian Gulf country of seeking to build atomic weapons under cover of its nuclear program. Iran rejects the claim and says it needs the technology to secure energy for is growing population.
In February 2010, President Mahmoud Ahmadinejad said Iran may be ready to exchange the detainees with Iranians held in the U.S. The overture was dismissed by the State Department.
Fattal and Bauer had been detained alongside a third U.S. national, Sarah Shourd, who was freed in September on bail of $500,000, with Iranian authorities citing “humanitarian” reasons. Shourd left the country immediately.
Bauer is a freelance journalist and photographer, who got engaged to Shourd while they were both in prison. Fattal is an environmentalist who was visiting Damascus before they headed to Iraq, according to freethehikers.org, a website that was set up to support their release.
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