hard to imagine that due to a tug of war between Democrats and Republicans, an
American default could occur, with all of the serious consequences this would
entail for the country and the global economy. Ö a few years ago this would
have been regarded as pure fiction."
On the calendar of the global
crisis - the most severe since the 1930s, September of 2008 is a kind of ground
zero. That was the month that Lehman Brothers went insolvent, the Bush Administration
wouldnít rescue it from collapse, and a shocking freeze of credit-shock spread
across the planet at computerized speed.
Another candidate to enter onto
such a calendar would be August 2nd, for a reason that just a few years ago
would have been regarded as pure fiction: on that day, the United States, for
the first time in history, will default on its creditors - that is, if Republicans
and Democrats donít come to an understanding on raising the U.S. debt ceiling, which
today stands at $14.2 trillion and which will be exhausted in early August.
Itís hard to imagine that due
to a tug of war between the Democratic and Republic parties, an American
default could occur, with all of the serious consequences this would entail for
the country and the global economy, which, with Europe's sovereign debt crisis,
is already obliged to live on a knife's edge.
President Barack Obama has
taken over negotiations with the Republicans, and there were meetings at the
White House over the weekend. Yesterday afternoon there was another.
Republicans have been
represented by House Speaker John Boehner. Until the latest session scheduled
for yesterday, Boehner had refused Obamaís proposal to pursue comprehensive tax
reform that would have allowed for savings of $4 trillion over ten years. The
Republicans prefer a more modest goal of $2 trillion.
The conflict is a sad comment
on how the issue has been contaminated by electoral considerations. That
Congress needs to raise the public debt ceiling, as it has several times, is
not in dispute. That is because the public accounts of the United States, along
with those of a good portion of the world, are unbalanced due to the necessary restructuring
of the banks, the preservation of industries (GM, Chrysler), the provision of resources
for the unemployed and the injection of dollars into the system in an attempt
to revive the economy. There was no alternative.
Just over a year before a presidential
election, the request for Congress to raise the debt ceiling was an opportunity
for Republicans to lash out at Obama. The opposition to the White House doesnít
want to commit to the more ambitious goal of $4 trillion because it doesnít want
to allow the Obama government to obtain one red cent from tax increases - and
he is seeking $1 trillion from that source.†††
This would be done, for
example, by allowing Bush-era tax breaks for high-income earners to expire. In
exchange for some tax relief for lower-income families, there has already been one
extension negotiated with Democrats. This tax rebate for the rich expires on January
2013, and Obamaís plans donít call for another extension. Moreover, Republicans
want deep cuts in public health and social spending, which are considered
untouchable by Democrats. Among Republicans, the Tea Party is exerting
tremendous pressure. So the stability of the global economy depends on the mood
of American voters.
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