America’s Weakness
Published in der Tagesspiegel
(Germany) on 15 April 2011
by Christoph von Marschall (link to original)
(Germany) on 15 April 2011
by Christoph von Marschall (link to original)
Translated from
by Ron Argentati.
Edited by Heidi Kaufmann.
In a few weeks, the USA will reach its statutory debt limit and will be unable to get any new loans. That means it will not be able to pay its bills. Will the world be plunged into a new financial crisis?
Does America become the laughingstock of the world, or will it be even worse? Many do not yet understand the danger that threatens the global economy. Others do, but do little more than hope things will go well. The USA will reach its statutory debt limit in a few weeks; it will then be unable to get new loans and will therefore be bankrupt. One-third of current accounts are paid with money received in the form of new loans. Agencies will be forced to close their doors. Those who hold U.S. bonds — purported to be the safest investment in the world — will stop getting interest on their investments. Then the dollar will plummet, banks will crash, and the world will be in the midst of another financial crisis.
It need not get to that point.
There is a simple solution: Congress should raise the national debt limit. It has always done so in the past. Governments of Western democracies always behave rationally, don’t they? They don’t consciously lead their nations into catastrophes, do they?
The government was threatened with shutdown a week ago because Congress had not yet passed a budget six months into the new fiscal year. In the ensuing fight over how much should be cut and who should bear the brunt of those cuts, both sides decided they didn’t have to compromise. Such negotiating tactics are called “brinkmanship.” The parties walk over to the edge of the precipice and say, “If we fall, it will be your fault because you didn’t give in.” That’s risky. If both sides remain stubborn, catastrophe follows.
How did it get to this point? Many Americans have long since retreated into reality denial, and many politicians encourage the people in their flights of fancy by proposing unrealistic solutions to the problem of how to escape the debt spiral. Nearly all independent experts say the United States will only get a handle on their debt problem with a program including three unpopular measures: drastic spending cutbacks across the board, increases in taxes and reform of the social support programs because of the increased costs connected with an aging population.
Conservative Republicans maintain they need only cut spending and reduce taxes so profits and hence tax revenues will increase. That was also the position taken by George W. Bush. He’s the main culprit that caused all this debt: he’s responsible for tax cuts, two expensive wars and a costly expansion of prescription drug benefits for seniors — all without paying for them with new revenues. Conservatives act as if Obama caused the debt buildup with bank and auto company bailouts and increased social programs. Their budget plan takes from the poor, gives to the rich, depends on economic growth that exists only in fantasyland and still doesn’t even theoretically get rid of the trillions of dollars in the deficit; at best, it results in only slight reductions. Liberal Democrats don’t want to avoid cutting anything from welfare programs. They want to just raise taxes and wait for the recovery to arrive.
Obama proposes a middle way that can be taken only by Congress; the president can only arbitrate. Congress is made up of a majority of moderates from both parties. The leaders of those moderate factions still hesitate to confront the radicals in their respective parties for fear of risking a party split. It’s so much easier to demonize the other party, take off for Easter break and then return to the old brinkmanship strategy. The intransigence of the radicals and the unwillingness to lead of the moderates is America’s great weakness, and they’re capable of plunging the whole world into the abyss.
Does America become the laughingstock of the world, or will it be even worse? Many do not yet understand the danger that threatens the global economy. Others do, but do little more than hope things will go well. The USA will reach its statutory debt limit in a few weeks; it will then be unable to get new loans and will therefore be bankrupt. One-third of current accounts are paid with money received in the form of new loans. Agencies will be forced to close their doors. Those who hold U.S. bonds — purported to be the safest investment in the world — will stop getting interest on their investments. Then the dollar will plummet, banks will crash, and the world will be in the midst of another financial crisis.
It need not get to that point.
There is a simple solution: Congress should raise the national debt limit. It has always done so in the past. Governments of Western democracies always behave rationally, don’t they? They don’t consciously lead their nations into catastrophes, do they?
The government was threatened with shutdown a week ago because Congress had not yet passed a budget six months into the new fiscal year. In the ensuing fight over how much should be cut and who should bear the brunt of those cuts, both sides decided they didn’t have to compromise. Such negotiating tactics are called “brinkmanship.” The parties walk over to the edge of the precipice and say, “If we fall, it will be your fault because you didn’t give in.” That’s risky. If both sides remain stubborn, catastrophe follows.
How did it get to this point? Many Americans have long since retreated into reality denial, and many politicians encourage the people in their flights of fancy by proposing unrealistic solutions to the problem of how to escape the debt spiral. Nearly all independent experts say the United States will only get a handle on their debt problem with a program including three unpopular measures: drastic spending cutbacks across the board, increases in taxes and reform of the social support programs because of the increased costs connected with an aging population.
Conservative Republicans maintain they need only cut spending and reduce taxes so profits and hence tax revenues will increase. That was also the position taken by George W. Bush. He’s the main culprit that caused all this debt: he’s responsible for tax cuts, two expensive wars and a costly expansion of prescription drug benefits for seniors — all without paying for them with new revenues. Conservatives act as if Obama caused the debt buildup with bank and auto company bailouts and increased social programs. Their budget plan takes from the poor, gives to the rich, depends on economic growth that exists only in fantasyland and still doesn’t even theoretically get rid of the trillions of dollars in the deficit; at best, it results in only slight reductions. Liberal Democrats don’t want to avoid cutting anything from welfare programs. They want to just raise taxes and wait for the recovery to arrive.
Obama proposes a middle way that can be taken only by Congress; the president can only arbitrate. Congress is made up of a majority of moderates from both parties. The leaders of those moderate factions still hesitate to confront the radicals in their respective parties for fear of risking a party split. It’s so much easier to demonize the other party, take off for Easter break and then return to the old brinkmanship strategy. The intransigence of the radicals and the unwillingness to lead of the moderates is America’s great weakness, and they’re capable of plunging the whole world into the abyss.
Dear Christoph von Marschall!
Thank you for the extensive and precise analysis. As a conclusion for me is that we have to begin to forget the worse financial praxis and go back to the 3% deficit and no more than 33% of national debt. With the target to arrive to have with mother earth some not so faraway day 0% natural deficit. Otherwise, if US National Debt continues increasing, the crisis that we are experiencing now, will be nothing in comparison with what will happen if what you predict occurs. And it will be the begin of the end of humanity.
Health and Peace