Washington is worrisome
The 11th hour deal between Republicans and Democrats over the US debt crisis was a compromise that worked politically in Obama's favour, but it comes at the expense of American national debt sustainability and Washington's international credibility, counsels Gamal Nkrumah
The bigger they are the harder they fall. The debt-ceiling showdown between Democrats and Republicans poignantly signalled the beginning of the end of America as we know it. Democrats were locked in an embarrassing public spat with Republicans last weekend over the very probable risk of America defaulting on its debt repayment obligations, even as fresh evidence was emerging of a pact between the two American parties' tacit connivance in imposing savage cuts on the unsuspecting American public.
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US President Barack Obama walks away from the podium after delivering a statement on America's debt ceiling talks, from the Diplomatic Reception Room of the White House in Washington
Washington has traditionally been deadlocked in a bipartisan tug-of-war. The race is on to induce African-American and Hispanic voters into the booths. The disfranchised are deeply disappointed. They traditionally were among the most faithful Democratic voters. The Republicans couldn't care less, but now they don't want to be blamed for the debt-ceiling crisis. It may cost them precious votes in next year's presidential elections.
The war of words between the two parties over America's debt had little to do with putting the world's superpower's finances on a sustainable footing, and everything to do with papering over the catastrophic loss of economic prowess, a fall from grace so to speak. America has not been there before. The comic fracas in Congress was a charade masking the ugly run-up to the credit crunch administered under the guise of next year's presidential race to the White House.
The United States debt currently stands at a staggering $14.3 trillion. The US risks defaulting on its debt repayment obligations. Worse, the world has a coherent notion as to how America's fall will affect us all. Enraged emerging economies spearheaded by the People's Republic of China lambasted the reckless handling of the US debt crisis by US politicians. "China is by far the top holder of US debt with holdings at $1.16 trillion in May," stressed the China Post.
The foolhardiness of Washington's political establishment, the China Post extrapolated, will "fuel global inflation and plunge the world into another recession."
China's state-run Xinhua was even more poignant and in a widely publicised editorial instantaneously and derisively accused US politicians of playing a "game of chicken". The editorial in an unprecedented harsh tone described US politicians as "dangerously irresponsible". It also stated categorically that the world was "kidnapped" by US domestic political calculations.
The Republican-led House of Representatives, or Congress, was in virtual Pandemonium. The Republican leader in the House, John Boehner abandoned attempts last Thursday night after failing to persuade enough hardline conservatives to support his bill. Some Congressmen and Congresswomen were no less scathing in their criticisms than the Chinese media itself.
Meanwhile, even though acknowledging that debt is an unacceptable disaster, any deficit-reduction plan is likely to enrage wide segments of American society and especially the most vulnerable and needy. Schemes aimed at cutting entitlements to social security and pensions, education and healthcare are likely to generate social discontent on a massive scale. Such schemes are not likely to go down well with the poor and disadvantaged, the African Americans and Hispanics, as well as senior citizens.
Ben Bernanke, chairman of the Federal Reserve, America's central bank, won accolades when he announced his intention of pumping trillions of dollars into the American economy by providing liquidity to frozen financial markets. Unemployment now stands at 9.6 per cent in the US and the rate is far higher among the African American and Hispanic communities. The US debt crisis threatens to tear the very social fabric of American society and exacerbate income inequalities.
The downgrading of US debt entails further cutbacks in vital and contentious sectors such as education and social welfare. Cuts in the flawed US educational system will hit teachers hard, and it comes at a time when spending on education has become a priority for the bulk of the American public.
Yet you have to give it to US President Barack Obama. He is pretty good at stitching up impressive looking deals. However, the effectiveness of Obama's 11th hour debt deal should not be gauged by the immediate US public and international sighs of relief. Obama himself stressed during the crisis that he does not want a short-term agreement with the Republicans who in turn suspect him of having engineered yet another electioneering ploy. After all, he always seems to have something up his sleeves.
What Obama has given America as the country's first ever African-American president is one compelling persona after another. He means different things to different people in America. He stands for all and sundry.
Still, rarely has such a connection been drawn between his multi-faceted, kaleidoscopic persona and his policymaking. His continuing marketability as grist for Washington's political mill has reached a climacteric zenith with the current debt defaulting crisis.
Senior citizens constitute a big block of US voters and they will not take kindly to whichever party that is seen as tampering with their interests. Neither the Republicans nor the Democrats can afford to allow senior citizens to break faith with them.
Hardline conservatives elected last November with the backing of the Tea Party are impervious to the demands of the disadvantaged. They care only for their lily white constituency, like the Sarah Palin's of this world. It is becoming increasingly apparent that the US cannot afford to let a small group of rabid rightist Republicans hold sway over national interests. Moreover, the hardline Republicans must not be permitted to let the Obama administration be widely perceived as bad managers of the American economy. That, indeed, will be political suicide and will impact adversely Obama's chances of winning a second term in office.
Hawks, demoniac lunatics and warmongers are determining the economic and financial policy of the wealthiest nation on Earth. The are utterly engrossed in their petty squabbles. They are doing so without the slightest sense of responsibility for the dynamics of the wider world. Divisions within the ranks of the Republicans have international implications, but the powers that be in Washington appear to be oblivious to the fact. "Republicans abandon vote as deadline looms. Republicans humiliatingly failed to get even their own bill through the House, exposing deep divisions within their own party," noted the British-based daily The Guardian.
The Democrats are hardly better even though they persist in pretending that they are less deaf than their Republican rivals. "Even if the bill had been passed, Democrats in the Senate said they would kill it, as did the White House," reported the Guardian.
However, he predicted a happy ending to the US debt crisis. "Magic things can happen here in Congress in a very short period of time under the right circumstances," Reid pontificated. It is utterly frustrating for an outsider to get inside the crazy worldview of parochial American politics.
The predicament of Washington is that the US defence budget is soaring and military spending is skyrocketing. "The impact of war is self-evident, since economically it is exactly the same as if the nation were to drop a part of its capital into the ocean," noted Karl Marx in his Grundisse: Foundations of the Critique of Political Economy. Marx's prophetic words still ring true.
So let us get back to the Chinese. China holds more than a third of the US debt. If the US debt crisis continues unabated, the Chinese might be tempted to turn to European securities. Japan, too, has holdings of $912 billion in US debt. "It is my hope and request that US authorities act on time to make efforts to stabilise their public finances," pleaded Japanese Deputy Finance Minister Fumihiko Igarashi. However, he noted that Japan is not particularly concerned about the American economic and financial conundrum as it is embroiled in its own economic malaise. "If you look at the currency market, we are not seeing a rapid decline in the yen as a result [of the US debt ceiling showdown]".
The consensus in Washington was that a bipartisan solution to the US debt crisis was sorely needed. But the sad truth is that neither of these parties' causes really passes the laugh test overseas.
European markets have plummeted because of the US debt crisis. Britain's FTSE tumbled amid fears of a new global recession. The DAX of Germany also fell sharply. Other European stock markets followed suit. There is tremendous concern about the US sovereign downgrade in international circles.
The world is watching closely how US proponents of deficit reduction and policymakers tackling the impending threat of defaulting on debt repayment will handle job creation in an economy, the world's largest, mired in a murky meltdown.
America has an African-American president, but Americans of colour are bearing the brunt of the American economy's severe slump. The US government is running out of credit. And, Obama pleaded with Congress to compromise. The US president accused Congress of "playing with fire".
The jittery global markets are creating a climate of confusion that will inevitably exacerbate the international economic recession. "It will be a long and painful adjustment for the US," Australian Treasurer Wayne Swan remarked tongue-in-cheek. Emerging economies as well as the leading industrially advanced nations will bear the brunt of the US economic meltdown. The US risks losing its Triple A credit rating which makes buying US bonds very attractive. Has the agreement made life any easier for impoverished and disadvantaged Americans, overwhelmingly people of colour?
I suspect not. The inference is that American lawmakers have no problem pumping billions into the global war on terror but have difficulty understanding that the world's wealthiest nation driven by a frenzy of power play cannot afford to pay its debts.