Malaya, look east to boost Malaysian racial unity!

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Look east – to boost racial unity

ON THE BEAT WITH WONG CHUN WAI

For the first time since 1963, we will celebrate National Day and Malaysia Day together. This should emphasise some points about our beloved country.
Image via Wikipedia
IT was just a year ago that Malaysia Day – Sept 16 – was celebrated as a public holiday to commemorate the date the country was formed.

In 2009, Datuk Seri Najib Tun Razak announced that Sept 16 had been declared a public holiday and that from 2010, Malaysia Day would be celebrated with activities that would foster the 1Malaysia spirit.

This year, it is even more special: With divine intervention, National Day and Malay­sia Day will be celebrated together for the first time.

This has been made possible by the fact that with Hari Raya Aidil Fitri falling on the last two days of August, it would not have been practical to hold the national day parade on the 31st.

A dual celebration would bring even greater meaning. It would also emphasise the point that there would have been no Federation of Malaysia if Sabah and Sarawak had not helped to form it on Sept 16, 1963.
Let’s get it right, Sabah and Sarawak did not join Malaysia, they helped to make Malaysia a reality.

Many young Malaysians in the peninsula wonder why they have to bring along their identity cards or passports when they travel to these two states or, worse, why they need to apply for work permits if they wish to work there.



This is a case of our history being badly taught in schools. Until today, our students are not properly told why these two states are different when it comes to control over their immigration, and their state administrative systems.

In the peninsula, state leaders are known as state executive councillors. In Sabah and Sarawak, they are known as state ministers. Both states, however, are led by chief ministers.

In the administration of justice, the courts in Sabah and Sarawak are part of the Federal court system but the Federal Constitution provides that there shall be two High Courts of coordinate jurisdiction – the High Court in Malaya and the High Court in Sabah and Sarawak, formerly called the High Court in Borneo.

But the most important focus of this year’s joint celebration should be this reminder that Malaysia does not comprise only Malays, Chinese and Indians.

Let us drive this point that in Sarawak, there are 27 distinct indigenous groups speaking 45 different languages and dialects while Sabah has 32 officially recognised ethnic groups with over 80 languages and dialects. Despite the diversity, there is racial harmony.

In many ways, those of us in the peninsula have fared badly in the area of race relations, no thanks to self-appointed guardians of our communities and morality too, in some cases.

The people of Sabah and Sarawak do not have any hang-ups about race. Take, for example, Datuk Seri Idris Jala, the Minister in the Prime Minister’s Department. A Kelabit from Sarawak, and a Christian, he has a Malay name. But this does not raise any eyebrow in the state. It is perfectly normal.

Another is Datuk Anthony Bujang, chief executive officer of the New Straits Times Bhd. He is a Malay from Sarawak but has a Christian first name. The accountant turned media boss’ name would not earn him any glance in his home state either.

It is well known that Sarawak Chief Minister Tan Sri Abdul Taib Mahmud has no qualms about opening churches, and he does this even in the middle of election campaigns. He has openly declared that he studied the Bible in school and his family has donated money to churches.

No Malay leader in the peninsula, in his right mind, would have dared to make such a statement unless he wished to commit political suicide.

It is in these two states that the spirit of 1Malaysia truly lives.

It is a joy to see people of all races sitting down together and enjoying their coffee in the old kopi tiam in these two states.

We need to see each other as Malaysians and nothing more. We need to remove racial prejudices and ignorance if we are serious about being 1Malaysia. Let’s make it a reality and not just a slogan.

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Malaysia Day: Let’s celebrate Sept 16 for its significance!

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Let’s celebrate Sept 16 for its significance

WHY NOT?  By WONG SAI WAN saiwan@thestar.com.my

It’s time to recognise the date our country was actually formed so that we can truly be a single nation.

THIS Aug 31 must have been the quietest ever in our 54-year history since independence from the British – no grand parades, no multi-million ringgit fireworks display and no days of closed roads to cater for all sorts of rehearsals.

Instead, the streets of Kuala Lumpur were empty as city folks deserted the Klang Valley for their hometowns over the Hari Raya Aidilfitri holidays.

The Government realised that it would have been practically impossible – and very unpopular – to stage the Merdeka Day celebrations as usual because it would fall on the second day of the Raya celebrations.

Even if they could have forced the civil servants, soldiers, police and other uniformed units to participate in a parade, there would not have been anyone to witness any of the festivities.

Instead, the celebrations will now be held on Sept 16 to coincide with Malaysia Day – that is the exact day 48 years ago Sabah, Sarawak and Singapore joined Malaya to form the Federation of Malaysia.

Decades ago, the whole nation used to observe Malaysia Day but later, in the 1970s, it was only left to Sabah and Sarawak to do so.

It would not be far wrong to say the separation of Singapore from the Federation in 1965 left a bitter taste in many in the ruling Government, thus making it difficult to continue to commemorate that date.

However, things have changed recently. The rising political importance of Sabah and Sarawak has made it necessary for the Government to celebrate the formation of Malaysia.

For years, the people in the two states have been grumbling as to why they should celebrate Aug 31 when it was not the date they gained independence; they would rather celebrate the day they joined the Federation.

After being independent from the British for over 54 years, it is time that we as a nation focus on celebrating the formation of the whole country.

Our leaders – past and present and from both sides of the political divide – have often paid lip service that we have to practise integration between the Peninsula and the two states on Kalimantan island.

The time for lip service is over and it is time for action, and we can start by making Sept 16 the permanent celebration of our nationhood.

We should celebrate how far we have come along, we should celebrate our achievements as a country, and we should celebrate how we are more united now than we were 48 years ago.



We should not forget about Aug 31; after all it is the day Malaya became a country. It is an important day in history and maybe it should be a day of remembrance while Sept 16 be the day of celebration.

Over the past few years, Aug 31 has become the day of flying the flag and show of patriotism, and somehow this Wednesday felt really different without all the jingoism about the need to show we are Malaysians.

In many ways, what we had been doing for Aug 31 was a bit contrived. We now need to bring back the true meaning of what it is to be Malaysian, and to allow that expression of patriotism to be real and from the heart.

After all, Prime Minister Datuk Seri Najib Tun Razak had used 1Malaysia as his rallying call to unite the people. Making Sept 16 a permanent celebration date will surely be a step in the right direction for him.

Last year, he announced that Sept 16 would henceforth be a Federal holiday.

Historically, Malaysia was to have been formed on June 1, 1963, but the date was later postponed to Aug 31, 1963, to coincide with the sixth Merdeka Day.
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As we all know, that did not happen because Indonesia and the Philippines objected to the formation of Malaysia.

The formation date was then postponed again – to Sept 16 – to give the United Nations team time to conduct referendums in Sabah and Sarawak regarding the two states’ participation in a new federation.

Recognising Sept 16 would also mean re-opening certain issues the two states have with the Federal Government over certain points of agreement when joining the Federation.

It is time to take a relook at the issues.

For one thing, I could never understand the need for Immigration procedure for travel between the Peninsula and the two states. Yes, at one time there was a need to control the number of people from the peninsular from grabbing all the job opportunities in Sabah and Sarawak.

Today, the education disparity has narrowed, and in some cases have become even non-existent.

I have met so many capable Sarawakians and Sabahans in my 27-year career in The Star, some of them as colleagues and some people I had interviewed.

In my frequent trips to the two states, I have found that the people there can more than stand up to any Orang Malaya (as Sarawakians call those from the peninsular) or Orang Semenanjung (the Sabahan equivalent) in terms of capabilities and qualification.

There are a reported 50,000 Sarawakians working in the shipyards of Johor, and they have proven to be essential workers for the industry. They have integrated well into Johor society.

This is among the many reasons we have for reinstating Malaysia Day. The following is a ditty I wrote to greet all my friends on Facebook and Twitter:

We have had KongsiRaya.
We have had DeepaRaya.
We have had XmasRaya.
In a few hours MerdekaRaya.
Selamat Hari Raya.
Selamat Hari Merdeka!!

To that I want to add Selamat Hari Malaysia come Sept 16.

■ Executive editor Wong Sai Wan has decided that he will only fly the Jalur Gemilang at his home on Sept 15 and 16 to celebrate the founding of our country.
  
Make Sept 16, Malaysia Day 

I READ “Let’s celebrate Sept 16 for its significance” (The Star, Sept 2) and fully agree with columnist Wong Sai Wan that we should celebrate Malaysia Day, which marks the formation of our country.

I have often admired the way the Americans celebrate their Independence Day on July 4 with barbeques, picnics and family gatherings.

I often wonder why we don’t do the same here in Malaysia. We have an official parade on Merdeka Day and some patriotic flag-waving and that’s about it.

Most Malaysians would rather take the opportunity to go on holiday overseas, or go shopping at the malls.

An occasion to remind ourselves of what makes this a wonderful country, to connect with our fellow Malaysians, and to forge a common destiny is lost.

An opportunity to be thankful for our independence and sovereignty is forgotten.

My friend Eddin Khoo would say this is because we don’t have “a common language of nationhood” – we did not have to really struggle together for our independence. Malaysia is unique in that it is made up of diverse peoples, with diverse histories, cultures, religions, and races, which makes it even
more difficult to achieve national unity.

I am an optimist, and I believe each of us has a part to play in nation-building. Yes, this is far from a perfect country, but we must make the most of our situation.

We have to start by looking at the cup as being half full rather than being half empty.

Let’s be thankful for our wonderful diversity of culture, race, religion – which gives us this delicious rojak of food, arts, architecture, clothing, etc.

Let’s be thankful that we live in a country unscarred by war and unburdened by natural disasters.

Let us celebrate all that is good about this country. Let us work together to make this country better and fairer for all. Let us treat each other with respect, sincerity and compassion.

It is said that “men did not love Rome because she was great. She was great because they had loved her”. Let us love our country.

It was with these thoughts in mind that my friends and I celebrated Malaysia Day last year by organising a street festival at Bangkung Row, Bangsar, where we had food stalls, NGO booths, cultural performances, talks, art exhibitions etc.

This Sept 16, we will again celebrate Malaysia Day at Bangkung Row, with a series of talks and discussions on topics such as: “The Voices of the Moderates”, “Constructed Landscapes” (a talk by artists Anurendra Jegadeva and Yee I-Lann), “In Bed with Malaysia – Exposing the Rakyat’s Sexuality”, “Prejudice and Stereotyping”, “Conversation on Culture with Farish Noor and Eddin Khoo”, “Found in Malaysia”, “Malaysian Writing in English”, “Undi Malaysia”, “Environmental Debate”, etc.

We will also be having Malaysian food and handicraft stalls, over 20 NGO booths, and wonderful performances such as dikir tewas with 100 performers all the way from Kelantan (with the legendary Daud Bukit Abal), Sabahan and Sarawakian dances, Orang Asal nose flute performance, acrobatic lion dance, local singers (including Amirah Ali and Azmyl Yunor), and a grand Jom Joget party with the famous Rozells from Penang (singing P. Ramlee, Jimmy Boyle, Teresa Teng, etc, tunes) to end the evening.

Do come and join us in celebrating Malaysia Day at Bangkung Row.

I hope all Malaysians will start their own Malaysia Day celebrations, whether it is a street party in your neighbourhood or a pot luck dinner at home with family and friends or lighting a candle for peace in our country.

What is important is that we take the opportunity to celebrate this wonderful country, and all that is good and wonderful about it.

Selamat Hari Malaysia.

ED SOO,
Petaling Jaya.

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Putting finance to work

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 The financial sector must be transformed and serve the real economy

THINK ASIAN By ANDREW SHENG

FINANCE is a service industry, but in the past three decades it seems to have gone its own way.

The functions of the finance sector are to protect property rights for the real sector, improve resource allocation, reduce transaction costs, help manage risks and help discipline borrowers. Financial intermediaries are agents of the real sector. Bankers were traditionally among the most trusted members of the community because they looked after other peoples' money.

The divide between bankers and their customers (the real sector) is epitomised by a recent report which said that the mantra of a large British bank is about “increasing share of wallet of existing customers”. It recalls Woody Allen's joke that the job of his stockbroker was to manage his money until it was all gone. And despite what bankers say, a lot more would have gone between 2007 and 2009 without massive bailouts from the public purse.

The heart of the problem is the principal-agent relationship, where trust is everything. The real sector (the principal) trusts the finance sector to manage its savings, and the banks, as agents, have a fiduciary duty to their customers. Agency business is a big public utility because the intermediary does not take risks, which are those of his customers. All this changed when the drive for short-term profits pushed banks more and more into proprietary trading for their own profits. All this was in the name of capital efficiency, a misnomer for increasing leverage.

In the past 30 years, with growth in technology and financial innovation, finance morphed from a service agent to a self-serving principal that is larger than the real sector itself. The total size of financial assets (stock market capitalisation, debt market outstanding and bank assets, excluding derivatives) has grown dramatically from 108% of global GDP in 1980 to over 400% by 2009 . If the notional value of all derivative contracts were included, finance would be roughly 16 times the size of the global real sector, as measured by GDP. The agent now dwarfs the real sector in economic and, some say, political power.

Can finance be a perpetual profit machine that makes more money than the real sector? In the US, finance's share of total corporate profits grew from 10% in the early 1980s to 40% in 2006. Since wages and bonuses make up between 30% to 70% of financial sector costs, there are tremendous incentives to generate short-term profits at higher risks, particularly through leverage.



The key thrusts of the post-crisis reforms in the financial sector are - caps on leverage, strengthened capital and liquidity, more transparency in linking remuneration with risks, and a macro-prudential and counter-cyclical approach to systemic risks. What the current reforms have not addressed is the increasing concentration of the finance industry at the global level and increasing political power that may sow the seeds for another Too Big to Fail (TBTF) failure in the next crisis.

In 2008, the 25 largest banks in the world accounted for US$44.7 trillion in assets equivalent to 73% of global GDP and 42.7% of total global banking assets . In 1990, none of the top 25 banks had total assets larger than their “home” GDP. By 2008, there were seven , with more than half of the 25 banks having assets larger than 50% of their “home” GDP.

Post-crisis, the concentration level has increased as there were mergers with failed institutions. With this rate of growth and concentration, the largest global financial institutions simply outgrew the ability of their host nations and the global regulatory structure to underwrite and supervise them. Such concentration of wealth and power is a political issue, not a regulatory one.

Finance is not independent of the real sector, but interdependent upon the real sector. It is a pivotal amplifier of the underlying weaknesses in the real sector that led to the financial crisis over-consumption, over-leverage and bad governance. In the past 30 years, the finance sector has helped print money, encouraging its customers and itself (particularly through shadow banking) to take on more leverage in the search for yield. Instead of exercising discipline over borrowers and investors, it did not exercise discipline over its own leverage and risks.

Unfortunately, there was also supervisory failure. To bail out the financial sector from its own mistakes, advanced countries, already burdened by rising welfare expenses, have doubled their fiscal deficits to over 100% of GDP.

In spite of these trends, we should not demonise finance or blame the regulators, but examine the real structural and systemic issues facing the world and how finance should respond. The greatest opportunity for finance is the rise of the emerging markets.

An additional one billion in the working population and middle class over the next two to three decades will have more to spend and more to invest. At the same time, the world needs to address the massive stress on natural resources arising from new consumption, which is likely to be three times current levels. Ecologically, financially and politically, the present model of over-consumption funded by over-concentrated leverage is unsustainable.

Indeed, to replicate the existing unsustainable financial model in the emerging markets may invite a bigger global crisis.

Sustainable finance hinges on sustainable business and on a more inclusive, greener, sustainable environment.

Financial leaders need to address a world where consumption and investment will fundamentally change.

To arrive at a greener and more inclusive, sustainable world, there will be profound changes in lifestyles, with greener products, supply chains and distribution channels.

Social networking is changing consumer and investor feedback so that industry, including finance, will become more networked and more attuned to demographic and demand changes.

As community leaders, finance should lead that drive for a more inclusive, sustainable future.

The greatest transformation of the financial sector is less likely to be driven by regulation than by the enlightened self-interest of the financial community.

Only when trust is restored, when finance cannot thrive independently of the real sector, will we have sustainable finance.

The incentive issues are very clear. If financial engineers are paid far more than green engineers, will a green economy emerge first or asset bubbles?

■ Andrew Sheng is president of the Fung Global Institute.

Credit Suisse cuts M’sia GDP forecast

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By JEEVA ARULAMPALAM jeeva@thestar.com.my

It says Asian growth set to slow more sharply

PETALING JAYA: Credit Suisse AG has cut its real gross domestic product (GDP) 2011 growth forecast for Malaysia to 4.6% from 5.3%, as the Western world is teetering on the brink of recession and large parts of Asia remain highly susceptible to growth developments in the United States and Europe.

It also cut its 2011 GDP forecast for other Asian economies such as Thailand, Hong Kong and South Korea.

In an economics research yesterday, Credit Suisse said Asian growth was set to slow more sharply over the coming months.

 “With the fiscal support provided during the global financial crisis removed and the lagged effects of higher interest rates working their way through, we had expected the Asian economies to soften from second quarter of 2011.

“Now that the Western world is teetering on the brink of recession we believe the outlook has dimmed further,” it said.

In addition to cutting its GDP forecast for this year, Credit Suisse trimmed next year's forecast to 4.8% from 5.8% previously. The new 2011 and 2012 GDP forecasts imply annualised sequential growth rates of an average 3.5% in the second half of this year and 5.5% for next year.

“What has kept us from cutting our growth forecasts further is the likely support from domestic demand. We think more investments from the Economic Transformation Programme (ETP) should come onstream, especially in the oil and gas sector which benefited from high oil prices.

“Also, the Government has underspent its budget in the first half and we expect it to increase spending in the second half to meet its target,” it said.

It added that some factors that exacerbated the slowdown in the second quarter were likely to be temporary but Credit Suisse did not expect domestic demand to be shielded from a further weakening in external demand.

“Moreover, Malaysia's growth is vulnerable to a collapse in commodity prices if this were to happen,” it said.

In the report, Credit Suisse said it expected Bank Negara to keep the overnight policy rate unchanged at 3% until the end of next year (it previously expected one 25 basis points hike).

With the global growth outlook highly uncertain and inflation slowing, it suspects that the central bank will be in no hurry to raise the overnight policy rate further. However, a severe global recession could see rates being cut.

“In contrast, we think there is little scope for the Government to stimulate the economy through fiscal policies above and beyond the existing high deficits they projected (5.4% of GDP for 2011).

“Even as things stand now, Malaysia would probably need to undertake significant fiscal adjustments over the next decade if it wants to bring its relatively high debt to GDP ratio down.

“A prolonged weakness in growth would increase the risk that the Government would further delay its plan to cut subsidies and raise the consumption tax,” it said.

Bank Negara is maintaining its GDP forecast of 5% to 6% for the full year as it expects strong domestic demand and ETP projects to fuel economic growth in second half of the year. Malaysia's second-quarter GDP moderated to 4%, compared with 4.9% in first quarter, dampened by a slowdown in the manufacturing sector and weaker external environment.

AmResearch Sdn Bhd, in a report last week, said that while it expected a full-year 5% growth rate to be achieved given the current climate, possible trigger points for a downgrade included an adverse impact of a very large drop in crude oil prices and any further delay in the ETP projects.

“As a net exporter of oil, Malaysia still relies heavily on crude oil in terms of generating income for the country. As long as the full-year average lies between US$85 and US$90 per barrel, all is well and within budget.

“On a positive front, a sharp fall in crude oil may well mean a reduction in total subsidies spent by the Government. The net impact will, however, be detrimental to the Government's coffers and overall growth,” AmResearch director of economic research Manokaran Mottain said in his report.

For latest GDP reports from the Statistics Department click here  

Chinese Moon Probe Reaches New Deep Space Destination

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SPACE.com Staff

An artist's interpretation of the China's Chang'e 1 lunar orbiter, which launched in October 2007 and ended its mission by crashing into the moon on March 1, 2009.CREDIT: CNSA.

Several months after departing from the moon, a Chinese spacecraft has arrived at a new destination about 930,000 miles (1.5 million kilometers) from Earth, according to news reports in China.

The Chang'e 2 moon probe arrived at Lagrange Point 2 (L2) — a place where the gravity of Earth and the sun roughly balance out — on Aug. 25, the Xinhua news service reported Tuesday (Aug. 30). Chang'e 2 had left lunar orbit in early June to head for deeper space.

China is now the world's third nation or agency to put a probe in L2, one of five spots in near-Earth space that serve as a sort of parking lot for spacecraft to hover without being pulled toward any planetary body. NASA and the European Space Agency have also accomplished the feat.


Officials from China's State Administration of Science, Technology and Industry for National Defence (SASTIND) said that Chang'e 2 will carry out exploration activities around L2 over the coming year, Xinhua reported. SASTIND also plans to launch two "measure and control stations" into outer space by the end of 2012, and Chang'e 2 will be used to test the stations' functionality at that time.

Chang'e 2 launched on Oct. 1, 2010, and arrived in lunar orbit five days later. The probe is the second step in China's three-phase moon exploration program, which includes a series of unmanned missions to explore the lunar surface. [Photos: Our Changing Moon]

This photo, taken by China's Chang'e 2 lunar probe in October 2010, shows a crater in the moon's Bay of Rainbows. The image is one of the first released to the public by China's space agency.
CREDIT: China Lunar Exploration Program [Full Story] View full size image

During its time orbiting the moon, Chang'e 2 took a lot of high-resolution photos to help plan out future missions, which will actually drop hardware onto Earth's nearest neighbor. China is aiming to launch a moon rover around 2012, and another rover will land on the moon and return to Earth with lunar samples around 2017, according to Xinhua.

Chang'e 2 finished up its duties around the moon in April but had enough fuel left over that officials decided to send the probe off into deeper space.

The spacecraft's predecessor, Chang'e 1, launched in October 2007 and conducted a 16-month moon observation mission, after which it crash-landed on the lunar surface by design in March 2009.The Chang'e probes are named after the nation's mythical moon goddess.

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It's Education, Stupid !

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It’s that time of year when I spend much of my time reading the books that have been nominated for the FT/Goldman Sachs Business Book of the Year. It’s a judging duty that is both a pleasure and a pain. The pain is the sheer amount of time it takes to wade through thousands of pages.  The pleasure is reading books that would not necessarily cross my path. This year, as with the last, many of these books are written by economists and, understandably, focus on the state of the world economy. It is interesting to read how many agree that education and training are crucial to long-term economic success, for individuals, companies and countries. I made a similar argument in my most recent book The Shift, focusing in particular on the types of education and training that create specialization. Here are the two reasons why it has never been so critical to become educated:

• Rampaging connectivity – will see at least five billion people around the world using some form of mobile device to download information, access knowledge and coach and teach each other. Some will have the intellectual capacity and motivation to really make something of this extraordinary opportunity, wherever they happen to be born. These people will want to join the global talent pool and, if possible, migrate to creative and vibrant cities. By doing so, this vast crowd of talented people will increasingly compete with each other, continuously upping the stakes for what it takes to succeed.

• The technological revolution – brought mobile devices to billions, and is now transforming how work gets done. Robots are taking the place of unskilled and semi-skilled workers, while business analytics, modelling and collaborative technologies are taking away much of what has traditionally been the role of the middle manager. However, while technology may be replacing the mechanical aspects of work, it is not replacing the more complex, skilled work that involves creativity and innovation. That’s the high value piece that remains, and it is once that requires education and training. 

As high quality education becomes more of a premium, we can expect the sector to begin to transform itself even more rapidly. Just what this transformation will look like is difficult to predict with accuracy. But here are two emerging trends that I believe will shape it over the coming decades:

The Gutenberg Project: the race is on to digitalise many of the books and articles of the world, while the professors of academic institutions such as MIT are making their key lectures available on the web. Combined with hyper connectivity and the potentially global reach of the Cloud, this means that knowledge and wisdom will be available to anyone with access to the Internet. This could see the development of new ways of educating that leapfrog those of normal educational institutions, creating more fluid, virtual and vibrant networks of learning. 

Virtual Schools and Universities: there has been a great deal of research over the last decade focusing on how people learn. This has looked at e-learning, face-to-face teaching and over-the-phone coaching. What has become clear is that none of these on their own are the best; it’s the combination of all three that has the greatest impact. This is important for educational strategies since at least two of these processes are virtual, and F2F can largely be substituted by video conferencing. I saw the speed of this transformation recently when I visited UOC (Universitat Oberta de Catalunya) in Barcelona. Its sleek headquarters are the hub of a virtual university that has 60,000 students (and growing) taught by a faculty of over 3,000 virtual educators. Using simulations, games and collaborative environments, the institution is building deep expertise in supporting education across the world.

Some have argued that, of all the institutional forms, education has changed least over the past few decades. It looks as if the need for deeper knowledge and rapid advances in learning technologies may change all that.

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Can The U.S. Super Committee Solve The Debt Crisis?

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America’s relentlessly-escalating national debt seems like a problem that defies resolution. Congress and the Obama administration couldn’t solve it recently when they agreed to raise the U.S. debt ceiling by another $2.1 trillion.

see photosAFP/Getty ImagesClick for full photo gallery: 5 Ways The United States Can Get Out Of Debt

Instead of agreeing on measures to reduce the country’s staggering debt, Congress and the president handed off the problem to a so-called Super Committee. The 12-member, bipartisan committee of national legislators, with an equal number of Democrats and Republicans, will study U.S. finances and recommend $1.2 trillion in budget cuts by November 23. (Read more: “Can The U.S. Regain Its AAA Rating?“)

Reaching an Agreement If the committee reaches an agreement on budget cut proposals, Congress must vote approval on them by December 23. If Congress votes on them accordingly, the $1.2 trillion in cuts will go into effect. As usual, however, the issues will be what gets cut and by how much.

There are many items on the committee’s agenda for discussion, including: raising taxes, revamping the tax code, Social Security, Medicare, Medicaid, healthcare for the elderly and the federal retirement program; these are all major issues that have been long debated in Congress.

Also up for debate and possible reduction is the 35% U.S. corporate tax rate. Many Democrats and Republicans agree that the rate is too high relative to rates imposed in other countries. Democrats, however, have proposed plugging tax loopholes as a means of making up the difference in revenue if the corporate rate is lowered.

So the committee may have a difficult time finding ideas that everyone – including their constituents – can agree on. For example, another particularly controversial tax deduction that some legislators proposed eliminating is the home mortgage interest exemption. A USA Today/Gallup poll conducted this spring asked survey participants if they would approve eliminating that deduction if overall tax rates were also lowered. Sixty-one percent opposed the idea.



What if an Agreement Can’t be reached? In the event that the committee fails to reach an agreement, $1.2 trillion in budget cuts will be automatically imposed in equal amounts on domestic and defense spending.

With committee members divided equally along opposing political lines, many observers believe a stalemate is inevitable.

The 12 appointed members are:

• Rep. Jeb Hensarling of Texas (Republican and committee co-chair):  Chairman of the House Republican Conference.   


• Sen. Patty Murray of Washington (Democrat and committee co-chair):  She is a member of the Budget and Appropriations committees.


• Rep. Chris Van Hollen of Maryland (Democrat): Van Hollen is the ranking Democrat on the Budget Committee.


• Sen. Jon Kyl of Arizona (Republican): The number two ranking Republican in the Senate behind Mitch McConnell and a member of the Finance Committee.


• Sen. John Kerry of Massachusetts (Democrat): A former presidential candidate in 2004 against incumbent George W. Bush, he is a member of the Finance Committee.  


• Sen. Pat Toomey of Pennsylvania (Republican): Elected to the Senate last year. Member of  the Senate Budget and Banking committees.


• Sen. Max Baucus of Montana (Democrat): Chairman of the Senate Finance Committee.  Also served on Obama’s debt commission.


• Sen. Rob Portman of Ohio (Republican): Former White House budget director in the Bush administration, and a member of Budget Committee.


• Rep. Xavier Becerra of California (Democrat): A senior member of the House Ways and Means Committee


• Rep. Dave Camp of Michigan (Republican): Chairman of the House Ways and Means Committee.   


• Rep. James Clyburn of South Carolina (Democrat): The third-ranking Democrat in the House and a member of the Appropriations Committee.


• Rep. Fred Upton of Michigan (Republican): Chairman of the House Energy and Commerce Committee.  

Committee members reportedly will draw upon previously proposed solutions from Republican and Democratic legislators, independent groups, Obama’s 2010 bipartisan deficit commission, among others, as a basis for discussion.

The American public, eager for solutions and an end to partisan bickering, have nevertheless been warned by analysts and former policy makers not to expect too much from the committee.

Reaching an Agreement If the committee reaches agreement, as a political and practical matter, the suggestions are expected to be narrow in focus and likely to win Congressional approval, while the still nagging major issues will remain: long term taxes and entitlements.

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