Unlike Russia's Duma, the U.S. Congress is No 'Vestigial Organ'
"Republicans
have let their constituents know that they are ready to fight the
administration for every taxpayer dollar and that not a dime will be spent
inefficiently. As wild as it may sound given the conditions of Russia's 'managed
democracy,' the U.S. Congress is not just a 'vestigial organ' of the executive branch,
but one of the instruments that contain it."
U.S. Treasury Secretary Timothy Geithner explains what would happen if the U.S. debt ceiling isn't raised, but assures people that he doubts lawmakers will fail to raise it, June 24.
Despite the fact that no one
really believed in the possibility of an American default, there was no shortage
of drama in the spectacle performed by Congressional Republicans. “The war of
nerves” lasted until the very last moment: Just 120 minutes before “X hour,” the
moment the United States would officially have found itself in technical default,
President Obama signed a law raising the debt ceiling against which so many
spears have been broken. Republicans, who oppose the incumbent Democrat, are
celebrating victory. House Speaker John Boehner told reporters after the vote:
“As you can see, all our demands have been met in this bill. … It gives us the
best shot we’ve had in the 20 years [for a balanced budget amendment to the
U.S. Constitution] … We've
been able to put the kind of fiscal handcuffs on this Congress that are sorely
needed.”
However, U.S. Treasury Secretary
Timothy Geithner was less optimistic - and not because he works on the Obama
team, which had to retreat in the face of the intransigence of the lower
chamber of Congress. He
is concerned about something else: “I think confidence here was absolutely very damaged by this
spectacle they’ve seen in Washington of a significant number of elected
officials in this country threatening default - the result is really
detrimental to confidence. … I don't think that that risk [of default] right
now is very significant. …If Americans, or investors around the world, lose
confidence in the capacity of Washington to deal with our challenges then what
you'll see is higher interest rates for all Americans. … I think this is a good
result, but a terrible process."
Indeed, the biggest outcome
of the confrontation, which began in May, was a serious blow to image of U.S. government
bonds, which have always been considered the paragon of reliability. While before,
use of the term “default” in reference to the U.S. was unutterable, over the
last two-and-a-half months it has been all-too-often sounded - not only from
the mouths of marginal economists and market "gurus" - but in the speeches
of the U.S. president, treasury secretary, and Congressional leaders.
Having transformed the once
perfunctory technical procedure of raising the debt ceiling into a topic of hard
political bargaining, the Republicans have reminded the world once again of how
dependent the global economy is on the stability of U.S. currency. And also,
that this stability is in the hands of a few dozen people who act solely on the
basis of their perceptions of what is good and bad for American voters.
Throughout the talks, the president and opposition lawmakers all appealed
exclusively to them - ordinary Americans.
America's creditors are
obviously unhappy to have had this reminder, and the search for alternatives to
the dollar as the world's reserve currency are likely to intensify for the
foreseeable future.
But for Americans, the
current political battle is a milestone of sorts. Three years of unprecedented fiscal
stimulus - by both the administration and the Federal Reserve - have failed to
result in economic growth sustainable enough to allow for an end to emergency
financing. The unemployment rate is not about to drop to pre-crisis levels, the
housing market is stagnant and the economy is constantly on the verge of a new
recession. GDP growth in the first half of the year was less than 1 percent. Cuts
in government spending and higher interest rates are fully capable of pushing
the U.S. economy into a new recession.
Republicans are right about
one thing: the path of growth through government economic stimulus by further expansion
of government debt is a dead end. The pre-crisis economic model that allowed
the United States to demonstrate a fairly decent rate of growth has exhausted
itself, and attempts to reanimate it with such dangerous medicine is likely to
cause an “acquired addiction” that can only exacerbate the consequences of the
next crisis.
There is another important
lesson, this time for Russia. In an interview with Russian media that Obama
gave after the "failed default," the American president said: “When
the party in control of the House of Representatives holds different views than
the White House, this leads to conflict, argument and disagreement. But to be
honest, I think we'll settle this debate as has always been the case. This is an
integral part of democracy. It's not always smooth … there are bumps in the
road. But on the other hand, we remain convinced that this is the best of all
forms of government, even if at times there are uncomfortable moments - and indeed
there are.” [Translated quote].
Republicans, among other
things, have let their constituents know that they are ready to fight the
administration for every taxpayer dollar and that not a dime will be spent
inefficiently (to say nothing of being stolen). As wild as it may sound given
the conditions of the Russia's “managed democracy,” the U.S. Congress is not
just a “vestigial organ” of the executive branch, but one of the instruments
that contain it.
