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Gazeta, Russia

America's Astonishing 'Battle for the Ceiling'


"Until recently, hardly anyone would have thought of comparing the economic situation of one of the E.U.'s least developed countries to that of the most powerful nation on earth. … After two decades of absolute world domination, the country has exhausted its past way of doing things. It is clearly at a crossroads and awaits consolidation on some kind of new basis. … But such a basis is nowhere to be seen."


By Fyodor Lukyanov*



Translated By Yekaterina Blinova


July 7, 2011


Gazeta - Russia - Original Article (Russian)

Republican House member Michele Bachmann leads the House Tea Party Caucus and is leading in Iowa's Republican straw poll. But her assertion that damage would be minimal if the U.S. fails to raise its debt ceiling is at odds with almost every economist outside of her Tea Party true believers.


BBC NEWS VIDEO: What would a U.S. economic downgrade really mean?, July 14, 00:01:42RealVideo

On the day the Greek Parliament voted for draconian budget cuts intended to save the country from bankruptcy, mainstream U.S. news stations began live morning coverage from Athens. Shots of disorder in the streets of the Greek capitol were interspersed with live coverage of politicians and financiers from around the world discussing the possibility of a default. But only 30 percent were commenting on the probability of a default in Greece. The rest were talking about the possible default of the United States, which at the time was just over a month away.


Until recently, hardly anyone would have thought of comparing the economic situation of one of the European Union's least developed countries to that of the most powerful nation on earth. But the coincidence once again reminds us of how unstable and entangled everything is in today's world. The parallels became even more evident by noon: at that very moment, as the Greek Parliament adopted its unfortunate bill, President Barack Obama began a specially-convened White House press conference on the impasse in negotiations with Congressional Republicans on the budget crisis.


The author of these words has never felt this level of depression and pessimism in Washington. The driving force behind this disappointment is of course the economy: the post-recession recovery is slow, the huge fiscal injection in 2009 meant to stimulate growth, according to common opinion, failed to yield the anticipated results. But most disturbing is the nearly 10 percent rate of unemployment - 14 million people. For Europe, with its still generous social welfare system, this is the norm. But Americans are accustomed to relying on themselves and feel extreme discomfort due to the lack of progress in the job market. Ninety one percent of the population believes the economy is in poor or mediocre condition. And the number that hasn't changed since 2008, when the mood and expectations dramatically collapsed. Sixty one percent say they don’t expect the economy to be any better a year from now. Although when people are asked about their personal situation, there is more optimism: 56 percent expect their well-being to improve.


Against this gloomy backdrop unfolds the "battle for the ceiling." In May, the United States reached this ceiling - the legal limit that the government is allowed to borrow, which is currently $14.3 trillion (slightly less than U.S. GDP). These limits have been set and reset many times since the beginning of the 20th century - in 2000s along, it was raised 10 times. But now this previously technical procedure has resulted in a full-scale political crisis, because after taking over Congress in January, the new Republican majority immediately declared that at all costs, it would put an end to Obama’s suicidal economic policies.


No one denies the need to combat the deficit. Obama himself proposed reducing it by $4 trillion over 12 years. The deadlock has arisen due to ideology - or in other words, how to do it. The president and Democrats intend to focus on tax policy - specifically, the repeal or reduction of tax breaks for the wealthiest. Republicans demand drastic budget cuts that would include social spending and government operations. As a result, talks have been held for several weeks without going anywhere - and with positions become ever-more entrenched.


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All parties concerned have a general idea of what a U.S. technical default would mean - which will occur on August 2nd if a deal on raising the debt ceiling isn’t reached. It won't be the end of the world, but America's inability to service its debt would mean a credit ratings collapse, new borrowing would be more expensive, a wave of instability would be triggered on the markets, and the global economic recovery would be threatened. 


In other words, America's problems will persist, only in a much more exacerbated form. And of course, all of us hope that the American establishment has enough sense to retrieve the situation without these difficulties.


But the widespread pessimism is also directly linked to the fact that the public and analysts who monitor trends in American politics note a growing polarization and alienation between the major parties. As a Washington Post columnist recently noted, there is a conflict between reactionaries and radicals, in which the first category surprisingly includes the most persistent liberal Democrats; and the second, the most extreme conservatives. The first seeks a return of the good old days of mid-twentieth-century social welfare, although today all the objective indicators suggest that the state simply cannot afford to expand such entitlements. The second group is obsessed with further tax cuts, but this, too, is unrealistic in the current environment.


The problem is not the stated positions themselves, but an obvious unwillingness to compromise. And the longer this continues, the more the economic issue acquires a dangerous dimension: backing down will look like weakness, and for Obama, who as it is always has to prove that he's a fighter, this is extremely inopportune in this pre-election season.


It is precisely this sense of a fruitless confrontation that is the greatest source of American discouragement.


At the end of George W. Bush's administration, the atmosphere was also very gloomy. Over 80 percent of Americans believed that the country is going in the wrong direction. But then there was hope for change: Bush was leaving - and those who would come in his stead would in any case be better. Right now, that isn’t so clear.


Many have been disappointed in Obama: his ratings for confidence and mistrust are the same - 40 percent. But there is no alternative. Republicans have yet to nominate a candidate that fills people with hope. The latest entrant - the elegant Congresswomen Michelle Bachman - represents a radical movement called the “Tea Party,” and is a slightly more moderate and progressive version of Sarah Palin. The noted New York Times columnist David Brooks has written that Republicans stopped being part of a normal party when it fell under the influence of a group for which politics is more of a psychological protest than a way of offering a practical alternative for governing.   



There is also growing concern among moderate Republicans about the isolationist mood that is growing in the ranks of their colleagues. Fifty five percent believe that America should be primarily concerned with itself. A majority of likely Republican candidates lean toward the need to leave conflict zones like Afghanistan. Former Governor Tim Pawlenty of Minnesota, who is also considered a possible nominee, recently even accused his opponents of indifference to America’s international standing and a failure grasp that in a globalized world, the country can't afford disengagement. Senators John McCain and John Kerry, who represent both parties, have joined forces in an attempt to overcome the skepticism and explain the importance of American activity in the Middle East. But their efforts have elicited little response.


As one American acquaintance said to me, something is happening to the nation. As a rule, the president has no difficulty getting citizens to support him when someone needs to be bombed. But Libya, although not a single American soldier has died there, fails to evoke any enthusiasm at all. Another source adds: “What kind of national support can we expect for our army in the field, when, say, a third of our troops in Afghanistan are paid contractors to whom the war has been outsourced?” [translated quotes].


It is highly uncharacteristic for the United States to be so downcast, which is why the current mood is so stunning. The problem of the debt ceiling will most likely be resolved, but that won't eliminate the deep divide within America's elite.


After two decades of absolute world domination, the country has exhausted its past way of doing things. It is clearly at a crossroads and awaits consolidation on some kind of new basis.


But such a basis is nowhere to be seen.


*Fyodor Lukyanov is Chief Editor for Russian in Global Affairs



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[Posted by WORLDMEETS.US July 18, 2:39am]



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