To default, or not to default? That is the question
It reached the eleventh hour, but finally the American House of Representatives agreed and passed the controversial bill increasing the debt ceiling and announcing enormous cuts to government expenditure, all in order to stop America having to default on its debts. This past week there has been extreme manoeuvring and politicking between all sides of the house to gain some kind of consensus to pass this bill in order to stop America defaulting for the first time in its existence.
Regardless of what this bill entails, it has polarised politics in Washington. Both Republicans and Democrats are on reflection left feeling disgruntled at the content of this bill, as it now looks to move through the Senate in the next day or so. Left- leaning Democrats look at the final product of these negotiations and see that Obama has succeeded too much ground to the Republicans and their Tea Party faction, sighting the large cuts in government expenditure by $2tn, which they argue will ultimately be felt by the poor. This is instead of raising taxes amongst the more affluent in America to patch up the whole in their public finances. On the other hand, the Tea Party grievance rests with the increasing of the debt ceiling by $900bn over the next few months and by another $1.5tn early next year instead of focusing on larger governmental cuts.
Moreover, the atmosphere became heightened when Gabriel Giffords came to the House to vote for the first time since being shot in Arizona in January. She was met by a standing ovation by both sides of the House in an emotional display. This legislation due to be passed on 2nd of August, once it has all but certainly passes through the Democratically controlled Senate will raise the debt ceiling till 2013 . This gives Obama much needed relief from this issue running up to the 2012 Presidential election.
Furthermore, in the long-term America will be met with a more difficult issue when it comes to government expenditure. The USA is a declining superpower and is struggling to accept this fact. The enormous public expenditure on domestic based munitions and defence contracts will not be sustainable in the future, as America slowly slides down the economic ladder. There is an overarching reality encapsulated in this bill that neither the Republicans or its Tea party colleagues would like to admit. If there was not an increase in the ceiling in order to maintain governmental expenditure, those who would lose out the most would be domestic defence contracts, leading to a slow decline causing enormous unemployment mirroring the de-industrialisation process seen in 1980s Britain.
This bill has revolved around a lot of compromise and debating in order to reach this agreement, an example of the modus operandi of the American political system, which can require a lot of cajolery and compromise. The result of this bill is a mishmash of short-term solutions and promises that resembles more of a Republican victory than a Democrat one. This is combined with a lack of progress in terms of long term fiscal security, an issue which will dominate the next Presidency, whoever it may be.
However, Obama’s manoeuvring and reaching an agreement over this bill, whoever it suits more, can and should be seen as good Presidency, putting his politics aside to reach an agreement for the greater good of America by not allowing it to default. This could be popular with the American public obviously excluding Obama’s largest critiques, the Tea Party movement. Whatever, the future for the Obama administration, America is looking sluggish in dragging itself out of recession. The actual results of this bill will not be known straight away, but America will need further fiscal remedy to stop this goliath staying down. The world is not ready for America to be down and out and especially for it to default. What is clear is that America’s economic future has enormous consequences for both the European and worldwide recovery.
Posted on August 9, 2011, in Foreign Affairs, General, Looking Forward, US Politics and tagged Debt, Democrat, Economics, International Politics, Obama, Republican, Tea Party, usa. Bookmark the permalink. Leave a comment.