American Lawmakers
Should 'Stop Playing Political Games'
"Declines
in the dollar and the associated rise of the yen are hurting Japanese firms that
depend on exports and is throwing cold water on earthquake-related
reconstruction. The situation is extremely worrying. … Reducing America's federal
deficit is an important task. But it is not realistic to negotiate such a drastic
fiscal consolidation without additional tax hikes."
Talks on raising the U.S.
federal debt ceiling involving President Obama, Democratic lawmakers and their Republican
counterparts are going badly.
A avert chaos on financial
markets and in the global economy, compromise is required.
U.S. federal debt obligations
have now reached the $14.3 trillion ceiling now provided by law (approximately 1.12
quadrillion yen).
If the U.S. government fails
to obtain Congressional approval to raise the debt ceiling by the Aug. 2
deadline, it will be unable to issue new Treasury bonds, thus running out of funds.
Should this happen, the payment of government salaries pension benefits will
almost certainly be delayed.
The impending deadline has resulted
in a heightened sense of caution on currency markets, triggering a sell-off of
dollars and sending the yen soaring to 77 to the dollar, a four-month high.
Such declines in the dollar
and the associated rise of the yen are hurting Japanese firms that depend on
exports and is throwing cold water on earthquake-related reconstruction the economic
recovery. The situation is extremely worrying.
The focus of the U.S. debt talks
is on how much the debt ceiling should be raised and in what manner the record-high
federal deficit should be reduced.
The opposition Republicans propose
raising the debt limit by $1 trillion for now, and after determining ways to cut
the deficit further by the end of the year, raising it again. The intention of Republicans
may be to stir things up before the presidential elections in the following fall.
Meanwhile, the Democratic
Party proposes to raise the debt ceiling by $2.5 trillion. Speculation suggests
that Democrats want to ensure that the issue won’t arise again before the
election.
If talks collapse, the
situation will become extremely serious, risking a U.S. government default,
which would mean that the Obama Administration will be unable to redeem U.S.
Treasury bonds and likely result in a downgrade of America's credit rating.
The governments of China and
Japan as well as financial institutions around the world hold a sizable amount
of U.S. Treasury Bonds. If the credibility - and hence the value - of these
bonds plunge, it will result in a sizable loss to bondholders and undercut stock
prices around the world.
The United States bears
responsibility for preventing this crisis. We hope that America's president and
other leaders will agree on a debt ceiling hike. Both parties should refrain
from playing political games and look squarely at the harsh realities of the world
economy and markets.
Reducing America's federal
deficit is an important task. But it is not realistic to negotiate such a drastic
fiscal consolidation without additional tax hikes.
Although the European Union and
other institutions have agreed to extend additional financial support to Greece,
the prospects for containing the Greek crisis remain uncertain.
The turmoil in the United
States and Europe should serve as an alarm bell for Japan, which is gripped by
the worst fiscal deficit in the developed world. Japan must expedite efforts to
put its own fiscal house in order.
