Tuesday, 15 October 2013
US Debt ceiling....one day this will be a real crisis
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.