Chaos within the US Government: Preemptive Resolutions To Evade a Global Crisis
Published in Kahoku Online Network
(Japan) on 11 October 2013
by Editorial (link to original)
(Japan) on 11 October 2013
by Editorial (link to original)
Translated from
by Taylor Cazella.
Edited by Robert O'Connor.
Ten days have passed since — failing to establish a provisional budget for the coming fiscal year — various government agencies were shut down on account of the two-party dispute in Congress. Manufacturers that require government inspections to ship their goods have had to begin temporary employee layoffs; the effects have begun to surface in civic life as well.
With concerns regarding the security of one's employment and income, there is also a turn toward restraint in spending. Dark clouds are forming on the path to American economic recovery.
In addition to fears over such an economic slowdown from a major power, what's got the global financial market's nerves on edge is the approach of Oct. 17 — the deadline for raising the federal debt ceiling.
The issuance of government bonds and the amount of money that the federal government can borrow is fixed; debt cannot be incurred in excess of the legally prescribed limit without congressional consent.
With the two-party dispute left unresolved, if the current ceiling of $16.7 trillion (about 1,620 trillion yen) is not raised by the deadline, financing difficulties will occur and the situation will arise in which interest cannot be paid on pre-existing debts. It is possible that the U.S. national debt could fall into default.
Even if the deadline passes by, it is considered possible for the federal government to make do for the time being with the available funds held in the Department of the Treasury. Nevertheless, if it were to come to a default, the credibility of the U.S. would be forfeit, the world financial market would be thrown into utter chaos and it is even possible that a recession greater than the Lehman Shock of 2008 would envelope the global economy.
President Obama and Congress must quickly put an end to this political strife, return the government to its normally functioning condition and avoid a global financial crisis that would originate from the U.S. and spread from there.
There are two main factors regarding the circumstances of the U.S. government going astray. The first is that, since the midterm election held in the fall of 2010, Congress has been in the “twisted” condition of having a Democratic majority in the Senate and an opposed Republican majority in the House.
The second is the conflict revolving around the reform of the medical insurance system that is to be implemented in 2014, which was a campaign policy for Obama. In an America which has a number of uninsured citizens exceeding 45 million, the reform aims at the actualization of a universal health care system. This law was passed before the "twist" occurred.
The implementation of this system is bound to bring about a "big government" that will expand public expenditures. The Republican Party, which touts a "small government" that seeks to reduce annual expenditures and stresses the importance of self-effort and personal responsibility, has seen its allergies grow ever worse in response to these reforms pushed forward by the president and the Democrats; they are requesting that the implementation of these reforms be postponed.
The "philosophy" held by each party is different. Their deeply ingrained opposition has brought about these "twisted" circumstances and, tied to expectations over the coming midterm election next fall, it's gone so far as to cause the present issue of raising the debt ceiling.
However, if they were to allow the country to fall into default, not only would the U.S. lose its credibility, but every national government that holds a large portion of U.S. debt, including China and Japan, would inevitably suffer a blow. The negative impact that the fall in value of the dollar and the chain reaction of low stock prices spreading out from the U.S. would have on the Japanese economy — which is now showing signs of moving away from deflation — as well as the global economy, is incalculable.
Mr. Obama has provisionally raised the debt limit and presented the Republicans with a plan to use that grace period to search for some means to break the deadlock; he has begun groping for a compromise. It is my hope that Congress and the Republican Party will respond with consideration for the bigger picture.
The U.S. must shoulder its responsibility as the world's largest economic power and plan some pre-emptive resolution for the current state of affairs so that chaos does not spread throughout the world.
With concerns regarding the security of one's employment and income, there is also a turn toward restraint in spending. Dark clouds are forming on the path to American economic recovery.
In addition to fears over such an economic slowdown from a major power, what's got the global financial market's nerves on edge is the approach of Oct. 17 — the deadline for raising the federal debt ceiling.
The issuance of government bonds and the amount of money that the federal government can borrow is fixed; debt cannot be incurred in excess of the legally prescribed limit without congressional consent.
With the two-party dispute left unresolved, if the current ceiling of $16.7 trillion (about 1,620 trillion yen) is not raised by the deadline, financing difficulties will occur and the situation will arise in which interest cannot be paid on pre-existing debts. It is possible that the U.S. national debt could fall into default.
Even if the deadline passes by, it is considered possible for the federal government to make do for the time being with the available funds held in the Department of the Treasury. Nevertheless, if it were to come to a default, the credibility of the U.S. would be forfeit, the world financial market would be thrown into utter chaos and it is even possible that a recession greater than the Lehman Shock of 2008 would envelope the global economy.
President Obama and Congress must quickly put an end to this political strife, return the government to its normally functioning condition and avoid a global financial crisis that would originate from the U.S. and spread from there.
There are two main factors regarding the circumstances of the U.S. government going astray. The first is that, since the midterm election held in the fall of 2010, Congress has been in the “twisted” condition of having a Democratic majority in the Senate and an opposed Republican majority in the House.
The second is the conflict revolving around the reform of the medical insurance system that is to be implemented in 2014, which was a campaign policy for Obama. In an America which has a number of uninsured citizens exceeding 45 million, the reform aims at the actualization of a universal health care system. This law was passed before the "twist" occurred.
The implementation of this system is bound to bring about a "big government" that will expand public expenditures. The Republican Party, which touts a "small government" that seeks to reduce annual expenditures and stresses the importance of self-effort and personal responsibility, has seen its allergies grow ever worse in response to these reforms pushed forward by the president and the Democrats; they are requesting that the implementation of these reforms be postponed.
The "philosophy" held by each party is different. Their deeply ingrained opposition has brought about these "twisted" circumstances and, tied to expectations over the coming midterm election next fall, it's gone so far as to cause the present issue of raising the debt ceiling.
However, if they were to allow the country to fall into default, not only would the U.S. lose its credibility, but every national government that holds a large portion of U.S. debt, including China and Japan, would inevitably suffer a blow. The negative impact that the fall in value of the dollar and the chain reaction of low stock prices spreading out from the U.S. would have on the Japanese economy — which is now showing signs of moving away from deflation — as well as the global economy, is incalculable.
Mr. Obama has provisionally raised the debt limit and presented the Republicans with a plan to use that grace period to search for some means to break the deadlock; he has begun groping for a compromise. It is my hope that Congress and the Republican Party will respond with consideration for the bigger picture.
The U.S. must shoulder its responsibility as the world's largest economic power and plan some pre-emptive resolution for the current state of affairs so that chaos does not spread throughout the world.