Deal on U.S. Debt Ceiling Shows American 'Strength'
"The
United States is setting a most visible example. … There was no way to escape
this adjustment, even if the country issues the globe's reserve currency - a
condition that will long continue despite the crisis."
Chairman of the House Budget Committee Paul Ryan: Still licking his wounds from criticism following the release of the "Ryan Budget," the apparent victory of the Tea Party in debt ceiling talks has given added impetus to he and the rest of the U.S. Republican leadership.
Among the many dates to go
down in history since the 2008 outbreak of the global financial
crisis, August 2, 2011 will hold a prominent place, being the day on which the
United States escaped an unprecedented default. Overcoming a tough standoff
between Democrats and Republicans, the House of Representatives on Monday
approved spending cuts that permitted authorization of an increase in the
public debt ceiling. Yesterday the project received the Senate’s endorsement
and was quickly approved by President Barack Obama.
Posted
by WORLDMEETS.US
Tough talks
between the parties and the White House on authorizing a rise in the debt ceiling
beyond $14.29 trillion - without which the country would
technically have been in default - has left a residue of tension. There is a
sense of defeat among Republicans and Democrats. The Democratic left accuses
Obama of having given in on one of the party's central tenets: cuts in social
programs, which can be executed automatically if the bipartisan commission
created to propose adjustments in a second stage of spending cuts doesn’t
arrive at a consensus. That’s true, but Obama and the Democrats did manage to
disarm the Republican trap of raising the debt ceiling in two stages, so that
the second one occurs before the presidential elections of November 2012.
Imagine if yet another chance of default arose during the campaign.
In exchange for cuts of
between $1.2 trillion and $2.4 trillion over ten years, and after having backed down
on tax increases for the wealthy, Democrats had that draft provision withdrawn.
So the debt limit has been raised by $900 billion now, and later, by $1.2
trillion - so that the White House doesn’t need to deal with this again
before under a new government in 2013. But there will continue to be great
bargaining with over cuts. There are differing perceptions about winners
and losers. Yet
in situations like this, there will always be contradictory views on tradeoffs. You win some and you lose some with these types of
agreements. That's the game.
Once again, the American
institutional system has demonstrated its strength. The United States is
setting a most visible example, even by demonstrating the influence of the
conservative and radical Tea Party movement, a kind of Republican sub-narrative. This
is also an important lesson on the tax issue for Brazil. It is critical that
our country mobilize. This is not something that can be dealt with behind
closed doors by alleged luminaries.
The United States, due to measures
taken to prevent a banking meltdown and revive the economy - which have yet
to have a major effect - increased the size of its debt-to-GDP and began
accumulating an annual deficit of 11 percent of GDP - an unsustainable
situation. There was no way to escape this adjustment, even if the country does
issue the planet's reserve currency - a condition that will long continue
despite the crisis. The public accounts don't respect voluntarism
from the powerful. As economist Ilan Goldfajn alerted us in an article in O Globo
yesterday, Brazil is already late in formulating a medium-
and long-term plan for fiscal adjustment, which is directly related to interest
and exchange rates. It is best to do this calmly.
