U.S. Gives Billions Of Dollars In Foreign Aid To World's Richest Countries - Then Asks To Borrow It Back
The U.S. is providing hundreds of millions of dollars of foreign aid to some of the world's richest countries - while at the same time borrowing billions back, according to report seen by Congress.
The Congressional Research Service released the report last month which shows that in 2010 the U.S. handed out a total of $1.4bn to 16 foreign countries that held at least $10bn in Treasury securities.
Four countries in the world's top 10 richest received foreign aid last year with China receiving $27.2m, India $126.6m, Brazil $25m, and Russia $71.5m.
Mexico also received $316.7m and Egypt $255.7m.
And yet despite the massive outgoings in foreign aid, the receiving countries hold trillions of dollars in U.S. Treasury bonds.
China is the largest holder with $1.1trillion as of March, according to the Treasury Department.
Brazil held $193.5bn, Russia $127.8bn, India $39.8bn, Mexico $28.1bn and Egypt had $15.3bn.
Foreign aid is earmarked for causes including HIV/AIDs prevention, combating weapons of mass destruction, fighting tuberculosis, and counter-terrorism efforts.
The news has caused grave concern, with Senator Tom Coburn, R-Okla, who requested the report seen by Fox News, calling the policy 'dangerous'.
In a written statement Senator Coburn said: 'Borrowing money from countries who receive our aid is dangerous for both the donor and recipient.
'If countries can afford to buy our debt, perhaps they can afford to fund assistance programs on their own.
'At the same time, when we borrow from countries we are supposedly helping to develop, we put off hard budget choices here at home.
'The status quo creates co-dependency and financial risk at home and abroad.'
The news arrives as lawmakers in Washington battle over the conditions for increasing the nation's ability to borrow money before defaulting on its obligations.
The government reached its $14.3trillion borrowing limit last month and both parties agree that spending cuts are needed, although Republicans refuse to raise taxes that Democrats insist on.
President Obama has met with both sides over the issue, but no progress has been made. The State Department did not comment. –Mail Online
The U.S. is providing hundreds of millions of dollars of foreign aid to some of the world's richest countries - while at the same time borrowing billions back, according to report seen by Congress.
The Congressional Research Service released the report last month which shows that in 2010 the U.S. handed out a total of $1.4bn to 16 foreign countries that held at least $10bn in Treasury securities.
Four countries in the world's top 10 richest received foreign aid last year with China receiving $27.2m, India $126.6m, Brazil $25m, and Russia $71.5m.
Mexico also received $316.7m and Egypt $255.7m.
And yet despite the massive outgoings in foreign aid, the receiving countries hold trillions of dollars in U.S. Treasury bonds.
China is the largest holder with $1.1trillion as of March, according to the Treasury Department.
Brazil held $193.5bn, Russia $127.8bn, India $39.8bn, Mexico $28.1bn and Egypt had $15.3bn.
Foreign aid is earmarked for causes including HIV/AIDs prevention, combating weapons of mass destruction, fighting tuberculosis, and counter-terrorism efforts.
The news has caused grave concern, with Senator Tom Coburn, R-Okla, who requested the report seen by Fox News, calling the policy 'dangerous'.
In a written statement Senator Coburn said: 'Borrowing money from countries who receive our aid is dangerous for both the donor and recipient.
'If countries can afford to buy our debt, perhaps they can afford to fund assistance programs on their own.
'At the same time, when we borrow from countries we are supposedly helping to develop, we put off hard budget choices here at home.
'The status quo creates co-dependency and financial risk at home and abroad.'
The news arrives as lawmakers in Washington battle over the conditions for increasing the nation's ability to borrow money before defaulting on its obligations.
The government reached its $14.3trillion borrowing limit last month and both parties agree that spending cuts are needed, although Republicans refuse to raise taxes that Democrats insist on.
President Obama has met with both sides over the issue, but no progress has been made. The State Department did not comment. –Mail Online
To Ten Countries Receiving The Most Aid:
Colombia $461.2m
Mexico $316.7m
Egypt $255.7m
Philippines $128.2m
India $126.6m
Russia $71.5m
China $27.2m
Brazil $25m
Thailand $16.75m
Turkey $8.2m
Colombia $461.2m
Mexico $316.7m
Egypt $255.7m
Philippines $128.2m
India $126.6m
Russia $71.5m
China $27.2m
Brazil $25m
Thailand $16.75m
Turkey $8.2m
<><><>*<><><>
Why The Debt Ceiling Doubters Are Wrong
What happens if Congress fails to raise the debt ceiling by Aug. 2?
Treasury Secretary Timothy Geithner says it would be "catastrophic." A growing number of Republicans say that's false -- at worst it would be "disruptive," in the words of Sen. Pat Toomey.
The reality is nobody really knows because it has never happened before: Congress has gone down to the wire in the past but has always raised the debt ceiling just in time.
"When I manage my family's finances, I would not do something where the consequences are unknown and unknowable," said Joe Minarik, who served as the chief economist of the White House Budget Office in the Clinton administration.
Likewise, he said, rolling the dice with the country's financing terrifies him.
But that is what some lawmakers are willing to do if Congress can't agree on a deal that serves as a significant down payment on debt reduction by Aug. 2.
If the ceiling isn't raised by then, the Treasury Department won't have enough money coming in to pay all the country's bills and won't be authorized to borrow to make up the difference. So that will mean delayed federal payments, Toomey said, but it won't be default, as Geithner has claimed.
What happens if Congress fails to raise the debt ceiling by Aug. 2?
Treasury Secretary Timothy Geithner says it would be "catastrophic." A growing number of Republicans say that's false -- at worst it would be "disruptive," in the words of Sen. Pat Toomey.
The reality is nobody really knows because it has never happened before: Congress has gone down to the wire in the past but has always raised the debt ceiling just in time.
"When I manage my family's finances, I would not do something where the consequences are unknown and unknowable," said Joe Minarik, who served as the chief economist of the White House Budget Office in the Clinton administration.
Likewise, he said, rolling the dice with the country's financing terrifies him.
But that is what some lawmakers are willing to do if Congress can't agree on a deal that serves as a significant down payment on debt reduction by Aug. 2.
If the ceiling isn't raised by then, the Treasury Department won't have enough money coming in to pay all the country's bills and won't be authorized to borrow to make up the difference. So that will mean delayed federal payments, Toomey said, but it won't be default, as Geithner has claimed.
Debt ceiling: What you need to know
In Toomey's opinion, the government can avoid default by continuing to pay interest and principal on outstanding debt. If investors get what's owed them, they won't blink if the country for a time can't pay all its other legal obligations on time.
Even if Toomey is right, the reality would be a lot more difficult and complex than he makes it sound.
Daily cash crunch: It's true Treasury collects enough in revenue overall to more than cover its interest and principal payments. The problem is that on any given day, that's not necessarily the case.
"You don't get paid in fiscal year 2011. You get paid on a Tuesday," said Susan Irving, director of federal budget issues at the Government Accountability Office.
And some days, the Treasury will not be taking in as much as it has to pay out.
Deciding who gets paid: Many believe Geithner would have the authority to prioritize payments. So he could decide to pay bondholders first and then anyone else he thinks is most critical to pay without delay.
The law isn't explicit about that, budget experts said. So it's not entirely clear whether Geithner would be able to prioritize payments -- unless Congress passes a law that says he does.
But even if he is allowed to prioritize payments, the situation could still be damaging.
Geithner: Risk default? You've got to be kidding
Deciding who to pay and who to put off will subject Geithner to a lot of second guessing from lawmakers and the public, and could open the door to lawsuits against the government. Those whose payments are delayed are likely to be quite unhappy and vocal about it.
And, "in a practical sense, the question is daunting," said Minarik, senior vice president of the nonpartisan Committee for Economic Development.
That's because most of the bills Treasury pays are essentially automated -- whether they're checks to contractors, taxpayers waiting for refunds, Social Security beneficiaries or federal workers.
And if interest and principal are to be paid first, everything else may have to be stopped until sufficient revenue comes in to take care of that. The same is true when Social Security checks have to be cut.
And there will be other headaches.
"There will be some challenge communicating to the entire government who will get paid and who won't," said Donald Marron, a former acting Congressional Budget Officer director.
Economic fallout: If a government check is late, someone's cash flow will be hurt.
And that person or business, in turn, may spend less or delay paying bills.
Hopefully that's all that happens.
The bigger worry is that at some point -- no when can say when -- investors or contractors who are still getting paid could start worrying that tomorrow they won't be.
Or even if some investors remain confident, others may not be. And then everyone, whatever their beliefs, may start making decisions based on what the other guy is doing, which may include heading for the exit.
That doubt could drive up interest rates -- and U.S. debt. That, in turn, will impair economic growth, which will reduce revenue and drive U.S. debt higher still. –CNN Money
In Toomey's opinion, the government can avoid default by continuing to pay interest and principal on outstanding debt. If investors get what's owed them, they won't blink if the country for a time can't pay all its other legal obligations on time.
Even if Toomey is right, the reality would be a lot more difficult and complex than he makes it sound.
Daily cash crunch: It's true Treasury collects enough in revenue overall to more than cover its interest and principal payments. The problem is that on any given day, that's not necessarily the case.
"You don't get paid in fiscal year 2011. You get paid on a Tuesday," said Susan Irving, director of federal budget issues at the Government Accountability Office.
And some days, the Treasury will not be taking in as much as it has to pay out.
Deciding who gets paid: Many believe Geithner would have the authority to prioritize payments. So he could decide to pay bondholders first and then anyone else he thinks is most critical to pay without delay.
The law isn't explicit about that, budget experts said. So it's not entirely clear whether Geithner would be able to prioritize payments -- unless Congress passes a law that says he does.
But even if he is allowed to prioritize payments, the situation could still be damaging.
Geithner: Risk default? You've got to be kidding
Deciding who to pay and who to put off will subject Geithner to a lot of second guessing from lawmakers and the public, and could open the door to lawsuits against the government. Those whose payments are delayed are likely to be quite unhappy and vocal about it.
And, "in a practical sense, the question is daunting," said Minarik, senior vice president of the nonpartisan Committee for Economic Development.
That's because most of the bills Treasury pays are essentially automated -- whether they're checks to contractors, taxpayers waiting for refunds, Social Security beneficiaries or federal workers.
And if interest and principal are to be paid first, everything else may have to be stopped until sufficient revenue comes in to take care of that. The same is true when Social Security checks have to be cut.
And there will be other headaches.
"There will be some challenge communicating to the entire government who will get paid and who won't," said Donald Marron, a former acting Congressional Budget Officer director.
Economic fallout: If a government check is late, someone's cash flow will be hurt.
And that person or business, in turn, may spend less or delay paying bills.
Hopefully that's all that happens.
The bigger worry is that at some point -- no when can say when -- investors or contractors who are still getting paid could start worrying that tomorrow they won't be.
Or even if some investors remain confident, others may not be. And then everyone, whatever their beliefs, may start making decisions based on what the other guy is doing, which may include heading for the exit.
That doubt could drive up interest rates -- and U.S. debt. That, in turn, will impair economic growth, which will reduce revenue and drive U.S. debt higher still. –CNN Money
<><><>*<><><>
U.S. Has Record $61.6TRILLION In Liabilities And Is Borrowing Astonishing $125 Billion A Month
> Obama 'concerned' about recovery not producing jobs fast enough but says double-dip recession not a risk
> Obama 'concerned' about recovery not producing jobs fast enough but says double-dip recession not a risk
> House Majority Leader ‘cautiously optimistic’ ongoing budget talks led by Joe Biden will produce agreement
We knew the U.S. economy's financial health and future was looking bad - but amazing figures show how rapidly it deteriorated even further last year.
The federal government has a record $61.6trillion of financial promises not paid for after $5.3trillion of new financial obligations were added in 2010.
This gap between spending commitments and revenue in the year gone by equals more than one-third of the nation's output, reported USA Today.
The new obligations were mostly for retirement programs such as Medicare and Social Security - and paint a situation far worse than the $1.5trillion in new debt taken on to finance the budget deficit.
Medicare added $1.8trillion in new liabilities and Social Security took on $1.4trillion in obligations, which is partly down to longer life expectancies.
Military and federal retirement programs also added more to the hole, reported USA Today in an analysis of federal finances.
$61.6trillion amounts to $534,000 per household and is more than five times what Americans have borrowed for mortgages, cars and other debt.
The government borrows an average of about $125billion a month.
Meanwhile on Tuesday, President Barack Obama insisted the country is not at risk of slipping into a double-dip recession.
But he conceded he does not know whether a sudden slowdown in job growth is a blip or an indication of a longer and more worrisome trend.
The President said the nation is on a solid but uneven path to recovery and the key is to ‘not panic’.
‘I am concerned about the fact that the recovery that we're on is not producing jobs as quickly as I want it to happen,’ Mr Obama said.
‘Obviously we're experiencing some headwinds,’ he added, at a joint news conference with visiting German Chancellor Angela Merkel.
Elsewhere, the number two Republican in the House is ‘cautiously optimistic’ over ongoing budget talks led by Vice President Joe Biden.
Majority Leader Eric Cantor believes they will produce an agreement on budget cuts at least as large as the accompanying increase in the government's ability to borrow.
He said the group is scrubbing all of the federal budget's major spending programmes for savings, including healthcare for the elderly and poor.
Speaker John Boehner has put forth a marker that any increase in the so-called debt limit should be matched by spending cuts at least equaling the new level of permitted borrowing.
The national debt has reached the $14.3trillion cap, but the Treasury Department is juggling government accounts to free up enough money to prevent the government from defaulting on its obligations until August 2.
‘I am cautiously optimistic we can find sufficient common ground with the administration to enact spending cuts that meet the goal outlined by the speaker,’ Mr Cantor said.
Mr Biden said last month that the group, which includes top lawmakers from both parties, is on pace to generate savings exceeding $1trillion. –MailOnline
No comments:
Post a Comment