Tuesday, October 8, 2013

THE UNITED STATES 'SHUTDOWN'

As the US Government shutdown enters its second week there appears to be no great sign of compromise by either Party with name-calling and blame being the order of the day.    I was in the United States in 1995 at the time of the last shut-down.   Then, as now, the Republicans forced the issue.  

History records that subsequently the electorate dealt a hit to the Republicans over the issue.  Less than twelve months later at the 1996 elections President Bill Clinton was re-elected with the Republicans losing a net eight seats to the Democrats in the House.

The jury is out as to whether history will repeat itself.   For myself I think the Republicans have made a tactical mistake in forcing the issue over 'Obamacare'.     That was a key battleground of the 2012 Presidential election which the Democrats won in spades (the same argument applies in NZL over the partial asset sales programme ... I digress).    So, just as Obama was reeling over being trumped by the Russians over his 'red line in the sand' and his decision to authorise air/missile strikes against the Syrian Government, there come the Republicans, galloping over the hill to his rescue, on an issue where Obama and the Democrats have the morale high ground.

I think a far greater matter at hand is the need for the US to raise it's debt ceiling in the next few days or risk default.    The consequences of that would be catastrophic and have an impact far outside the continental United States.

I have a certain sympathy with the Republicans over the need to address the issue.   While we in NZL are still borrowing at the rate of $110m per week (thereby increasing our debt ceiling) that is massively down on just a year ago and against a backdrop of the books being returned to surplus in 2014/15 allowing debt to be repaid, in the United States there is no mood by the Democrats to reign in spending/address the growth in spending in any meaningful way.     Nowhere have I seen any credible forecast that the US intends to return to budget surplus anytime soon and certainly not in the next two decades.   

For America to continue to mortgage itself to China should be a worry for the Government and especially if 'events' conspired for China to call in the debt.    That's the issue the Republicans should be attacking the Democrats on ... not battles already fought and lost.
     

    

2 comments:

JC said...

There is no fear that can or will default on its debt. Article 14 makes sure of that:

http://www.powerlineblog.com/archives/2013/10/the-federal-government-cant-and-wont-default-on-its-debt-obligations.php

There is plenty of revenue and all that would happen is savings would be made against revenue so the interest on the debt could be paid.

But mainly, we have the ironclad assurance from Obama about the perils of debt when it was $7 billion under Bush in 2006:

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure.

If Washington were serious about honest tax relief in this country, we would see an effort to reduce our national debt by returning to responsible fiscal policies.

Washington is shifting the burden of bad choices today onto the backs of our children and grand children. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit."

JC

The Veteran said...

JC ... Obama's comment re the debt limit looks like the makings of a Tui ad.

Yeah Right!