United States: The Congressional Debate and the Real World
The recent debate between Congress and the president is a confrontation within the American political class that contains both political and economic elements involved in the management of the government and the duties of the state with regard to the promotion of the common good.
The debate seems surrealist from time to time because it is about money, something that the American economy is not lacking in, not only due to the possibility of printing more bills but its ability to create bonds. In this respect the conflict was not about the functioning of the economy but the solvency of the government.
The size of governments has increased and their operation has become more expensive. It has to be said that managing the government is now more expensive that just about everything else. I am not only referring to the bureaucracy that must be cut everywhere; the corruption, the squandering and the ostentation, the unjustified expenses for pointless events, formalities and ceremonials, the generosity of public funds and other bad habits associated with power.
Military expenses increase with no justifications. The boom of terrorism, drug trafficking and organised crime has shot costs of security up and has created an excuse so that some governments spend so much in watching and protecting their citizens. Social assistance is becoming more expensive and health care and education services are increasingly more costly. Administrations need more money in order to cover the cost of their management so there is only one alternative: increasing taxes.
Rightfully or wrongfully, societies refuse to pay more taxes and tax evasion has become a widespread crime. Everybody wants an efficient and inexpensive government, generous public policies and fewer taxes. Administrations are becoming increasingly unpopular, as political oppositions console themselves and demagogy is reaching high levels. There will be changes in the end, and those who criticize today will justify tomorrow. Those who practise “opposition by trade” will go on with their erosive labors and history will continue. Squaring the circle is impossible.
In the 1970s, the trauma caused by the rise of oil prices was overcome. In the 1980s, the United States recorded moderate deficits and in the 1990s it balanced the federal budget. When Bill Clinton left the presidency in January 2001, he left a surplus of $559 million in the coffers.
The mistaken economic policy of George W. Bush was compounded by the incidents of 9/11 and the war against terrorism, which shot government expenses up. The surplus soon became a deficit of $5.8 billion. In 2007, the imbalance amounted to $9 billion and by the end of Bush’s term it had reached $10 billion. Obama’s inheritance from Bush included two wars in progress.
Then, when people thought about Obama capacity to face the debt as part of the economic crisis inherited from Bush, a catastrophic wave of collapses and financial chaos sped up and forced the president to use great sums of money from the state in order to save the American financial system, the motor industry and several banks from bankruptcy. This further increased public expenses.
The United States has issued “Treasury bonds” and placed them on the market in order to obtain money without increasing taxes. These bonds are certificates of indebtedness which the American state pays for and are part of the massive debt which is incessantly growing.
In order to prevent the debt from exceeding the country’s payment capacity, Congress has established the following rule: the debt total cannot surpass the total of the gross domestic product. This relation is just a marker and if it is not clear enough, some misconceptions can arise. Misconceptions such as the following: Massive debts are paid with the GDP. This is untrue.
The GDP measures the performance of the economy by means of a sum of the value of all assets and services which are produced in a year. The GDP is not money that belongs to the government so the government cannot use it to pay its debts. The fact that public debt is an accumulated total whereas the GDP is a deposit which is generated each year is omitted and this is making increasing confusion.
In any case, the important thing about the debate is that taxes were not increased to the rich and oil companies, and military expenses were not reduced, as proposed by the president. In order to please the Republicans, some social programs that benefit the most vulnerable have been reduced.
It is difficult to know whether the Republican or the Democratic Party won. The former was consistent with its commitment to protect the rich whereas the latter showed its opponents up. What is unquestionable is that both the middle class and ordinary citizens lost. They have already made their bets ahead of the 2012 elections. See you then.
The debate seems surrealist from time to time because it is about money, something that the American economy is not lacking in, not only due to the possibility of printing more bills but its ability to create bonds. In this respect the conflict was not about the functioning of the economy but the solvency of the government.
The size of governments has increased and their operation has become more expensive. It has to be said that managing the government is now more expensive that just about everything else. I am not only referring to the bureaucracy that must be cut everywhere; the corruption, the squandering and the ostentation, the unjustified expenses for pointless events, formalities and ceremonials, the generosity of public funds and other bad habits associated with power.
Military expenses increase with no justifications. The boom of terrorism, drug trafficking and organised crime has shot costs of security up and has created an excuse so that some governments spend so much in watching and protecting their citizens. Social assistance is becoming more expensive and health care and education services are increasingly more costly. Administrations need more money in order to cover the cost of their management so there is only one alternative: increasing taxes.
Rightfully or wrongfully, societies refuse to pay more taxes and tax evasion has become a widespread crime. Everybody wants an efficient and inexpensive government, generous public policies and fewer taxes. Administrations are becoming increasingly unpopular, as political oppositions console themselves and demagogy is reaching high levels. There will be changes in the end, and those who criticize today will justify tomorrow. Those who practise “opposition by trade” will go on with their erosive labors and history will continue. Squaring the circle is impossible.
In the 1970s, the trauma caused by the rise of oil prices was overcome. In the 1980s, the United States recorded moderate deficits and in the 1990s it balanced the federal budget. When Bill Clinton left the presidency in January 2001, he left a surplus of $559 million in the coffers.
The mistaken economic policy of George W. Bush was compounded by the incidents of 9/11 and the war against terrorism, which shot government expenses up. The surplus soon became a deficit of $5.8 billion. In 2007, the imbalance amounted to $9 billion and by the end of Bush’s term it had reached $10 billion. Obama’s inheritance from Bush included two wars in progress.
Then, when people thought about Obama capacity to face the debt as part of the economic crisis inherited from Bush, a catastrophic wave of collapses and financial chaos sped up and forced the president to use great sums of money from the state in order to save the American financial system, the motor industry and several banks from bankruptcy. This further increased public expenses.
The United States has issued “Treasury bonds” and placed them on the market in order to obtain money without increasing taxes. These bonds are certificates of indebtedness which the American state pays for and are part of the massive debt which is incessantly growing.
In order to prevent the debt from exceeding the country’s payment capacity, Congress has established the following rule: the debt total cannot surpass the total of the gross domestic product. This relation is just a marker and if it is not clear enough, some misconceptions can arise. Misconceptions such as the following: Massive debts are paid with the GDP. This is untrue.
The GDP measures the performance of the economy by means of a sum of the value of all assets and services which are produced in a year. The GDP is not money that belongs to the government so the government cannot use it to pay its debts. The fact that public debt is an accumulated total whereas the GDP is a deposit which is generated each year is omitted and this is making increasing confusion.
In any case, the important thing about the debate is that taxes were not increased to the rich and oil companies, and military expenses were not reduced, as proposed by the president. In order to please the Republicans, some social programs that benefit the most vulnerable have been reduced.
It is difficult to know whether the Republican or the Democratic Party won. The former was consistent with its commitment to protect the rich whereas the latter showed its opponents up. What is unquestionable is that both the middle class and ordinary citizens lost. They have already made their bets ahead of the 2012 elections. See you then.