US heading for harsh spending cuts to bring deficit down

| December 1, 2010 | 0 Comments

A US panel has been established to help slash the budget deficit and it is calling for harsh spending cuts and tax hikes.

In the 12 months to September, the budget deficit stood at $1.3 trillion (£837 billion) and experts have argued that more should be done to narrow the gap.

This week, President Barack Obama suggested a two-year pay freeze for federal Government workers, in an attempt to trim the budget deficit, which currently stands at around 9% of GDP - an amount which many believe is unsustainable in the long-term.

The President and his Democratic Party have been criticised for putting too much money into healthcare policies and economic stimulus measures - one of the reasons for the Democrats’ poor performance in the last month’s mid-term elections.

Debt in the US is similar to levels of that in some European nations, which in turn has suggested that the euro zone crisis could ultimately spread to the US, which is why it is introducing the tough measures.

The measures include cuts to Social Security and federal healthcare programs, a rise in the retirement age, the loss of 200,000 Government jobs and a 15-cent per gallon increase in gasoline tax.

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