Sunday 31 July 2011
US can't cut it in debt debate without making savings
The world won't come to an end if Tuesday's deadline to resolve America's fiscal crisis is not met, argues Ruth Dudley Edwards
I FEEL depressed reading most American newspapers. Their editors are grave people who value the portentous and think entertaining readers an unworthy populist aspiration. Such papers are in their element now, churning out page after page of unreadable high-minded handwringing about the deadlock on Capitol Hill.
True, there's plenty to be grave about. The Obama administration set a deadline of Tuesday for agreement to raise the national borrowing limit. If this isn't met, apparently the government will have to default on loans, federal salaries, pensions, social security and God knows what else will go unpaid, US credit ratings will be severely downgraded and the markets will go mad -- and not in a nice way. Financial apocalypse now.
So as my new hero, the Washington-born Arab-American comedian Remy Munasifi simplifies the government line in the chorus to his rap: "Raise da debt ceiling!/ Raise da debt ceiling!/ Raise da debt ceiling!/Raise da debt ceiling!"
The Republican right sees the Obama administration as fiscally incontinent to a criminal degree, with an insouciance about debt well expressed by Munasifi: "Fourteen trillion in debt/but yo we ain't got no qualms/droppin $100 bills/and million dollar bombs/spending money we don't have/that's the name of the game..."
Certainly, there's no argument that Obama -- by favouring the European social democratic model of a generous welfare state over traditional American self-reliance -- has brought this civil war on himself. You don't have to be a member of the Tea Party to fear the country could end up bankrupt. Yet in rejecting prudence, Obama is following in the footsteps of Bill Clinton and George W Bush.
Clinton left a budget surplus, but by yielding to pressure from a Democratic-controlled Congress to allow the government-subsidised Federal National Mortgage Association (aka Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) make loans available to those who couldn't afford them, he bears much responsibility for the subprime mortgage crisis that would play havoc with the financial markets.
Domestically, Bush spent merrily and left Obama with two expensive wars.
Yet Obama's spending instincts were unrestrained by the dodgy finances he inherited. As Munasifi puts it: "Social Security surplus?/Oh, guess what? it's gone/I got my hands on everything/like Dominique Strauss-Kahn." He spent what there was on reforms like healthcare, much that there wasn't, and now wants more. What's more, he's desperate for a finalised deal that means the issue is no longer live in election year.
Republicans who believe the country faces ruin unless it straightens out its finances and lives within its income refused to support John Boehner, Speaker of the Republican-controlled House of Representatives, who'd been offering a compromise that would involve raising the debt ceiling while instituting many billions of spending cuts. Like fiscal conservatives in, for instance, Ireland and the UK, they've spotted that -- as Munasifi observes -- governments "ain't got no quantitative statutory budget restraints", so cuts usually mean cuts in spending increases rather than actual cuts.
Vince Cable, the self-important British business secretary, observed recently that "the biggest threat to the world financial system comes from a few right-wing nutters in the American Congress rather than the eurozone". That's the popular liberal view in the US and Europe, but that doesn't make it correct.
It's easy to sneer at Tea-Party types, but it's also foolish: they represent people who live within their means, have seen the world plunged into economic chaos by bad decisions and public and private profligacy and think their country's very independence is in peril.
Obama has a poor record in making political deals, and he bears much of the responsibility for turning what were bound to be difficult negotiations into a game of fiscal chicken.
The world won't come to an end if the Tuesday deadline isn't met: interest on government loans could still be paid. But for its long-term health the US has to address the problem identified by Musanifi: "So if you look at the chart/and examine the trend/we borrow 40 cents of every/single dollar we spend."
Whatever the liberal media thinks, raising da debt ceiling without making da cuts will lead to a default in the end.
Ruth Dudley Edwards