Tuesday 15 October 2013

US Debt ceiling....one day this will be a real crisis

I have not really concerned myself too much with the US being unable to get approvals through the Senate and Congress about its Government shut down or the potential of not raising its debt ceiling. This is no doubt because, along with everyone else, I have seen this wolf-crying movie and am pretty sure I know how it ends. There is some messy, not quite complete, deal which is struck on the last day and all is fine.

However, one day I also know that the story of the boy who cried Wolf has a different ending. In the US the Tea Party is reviled by the left, but many of its members have really quite orthodox idea about money. The Democrats, whilst not as hateful of capitalism as our Labour party, have followed the same approach of creating a client state of welfare recipients. Moreover, this group is not only large, but in real terms poor. The poor of America are in a far worse state than say the poor of the UK. Society is split and the economy is recovering but no one thinks the US is going to rise again to have 50% of world GDP, just as the UK won't return to its pre-WW1 heyday either.

The US budget is though in better shape than most European ones and thanks to Shale Gas the US has discovered another motor to go with its computer-based technology leadership. The US is not going to collapse or face a fate like that of France in the near future, where lack of leadership and competitiveness will enforce a period of absolute decline.

However, one day the deficit must be addressed and the endless debts too. Plus as the society ages the Country must face up to pension and health care costs. In many ways, this is what the Tea Party want to do today, rather than wait another decade. They don't have much support for this view and their constant clashes in Congress are probably not helping. But then again, President Obama is also being hard nosed with them, calculating he can get his spending through and welfare bills maintained or increased with higher taxes. It did not quite work last time and ended with Sequestration.

So one day, the Republicans and their Tea Party elements are going to think they have nothing to lose and indeed, that chaos maybe the only way back for them. In the UK we had Gordon Brown with his scorched earth policy for 2 years who played a similar, but opposite role. Politics is dirty and the collateral damage to the economy and people is worth it for the ideologues. So whilst I think there will be a deal today, one day the boy who cried Wolf will be right and the debt ceiling won't be raised.


Budgie said...

The hugely irritating fact is that government is both too big and too inefficient. It could do the jobs it does now, but with 80% of the tax take (and no borrowing). It would need someone at the helm who believes it possible, can actually work hard, and who can adjust poor quality legislation resulting in fewer bureaucrats.

andrew said...

Imo any organisation with over 120-140 employees can be cut by 10% without any immediate externally visible impact.
whether that is the right thing to do is another question.
some years later the truth comes out but by then you only know by comparing notes down the pub.

Anonymous said...

It could come much closer this time. Throughout the budget problems the Democrats have succeeded in being petty while placing most of the blame on the Republicans.

The Republican House of Representatives has offered many compromises and piecemeal budgets which the Democratic Senate keeps throwing out because they want the whole budget that includes Obamacare.

The current fiasco really isn't about the Tea Party or the debt ceiling but is about Obamacare.

In a parliamentary system the blame would fall squarely on the ruling party that proposes the budget (the presidency proposes the US budget). If a PM couldn't get his budget passed then he would have to back off and wait for another day, go to the polls, or suffer a vote of no confidence.

But the US doesn't have anything to remove a lame duck. Obama will stand his ground as long as he can keep the media on his side.

You can say that Obamacare is needed and is morally right etc etc, but it is the leader's (i.e. Obama's) responsibility to compromise when in a situation similar to a minority government.

Timbo614 said...

They settled!! Ha "Historic" "brave" "We did for the people"

Cheering all round


Told ya so!