Foreign Affairs: In Washington, the Lines Are Drawn

• The United States government stays in business, now that Democrats and Republicans finally came to a fiercely fought budget deal last Friday.

• The United States will spend $38.5 billion less in 2011 compared to 2010 and $78.5 billion less than Barack Obama had estimated.

• Budget clashes will continue to decide the debates in Washington until the 2012 elections.

• Soon the United States has to increase her national debt limit; otherwise the country will be unable to pay its debentures, which will most likely lead to a new financial crisis.

• Debates are also necessary regarding a controversial Republican budget proposition that should save thousands of billions of dollars over the next 10 years.

The United States barely avoided the feared government shutdown, a forced closure of the government because there is no budget and therefore no money, last Friday evening. Republicans and Democrats came to a compromise mere hours before the deadline. Almost one million federal employees were able to go to work the next Monday morning; New York tourists were able to visit the Statue of Liberty; and soldiers risking their lives in Iraq and Afghanistan are at least paid on time.

Crisis averted? For now. It seems very likely that the budget crisis from last week will become the warm-up for stronger confrontations later this year, the stepping stone to the 2012 presidential elections. Last week, the light was shed within the United States on the ideological fractures that will dominate the discussions in the coming year.

Barack Obama announced last Monday that he wants to run for re-election. That same day, Paul Ryan, Wisconsin congressman and rising star of his party, presented the Republican budget proposal for 2012. This is nothing less than draconian. Ryan wants to privatize Medicare, the public health insurance for the elderly, which would lead to increased out-of-pocket co-pay on their health care costs. At the same time, he wants to save hundreds of billions of dollars on Medicaid, the health insurance for the poor.

Evidently, Obama’s health care reform from last year needs to be abolished, according to Ryan. He also decided to butcher other sectors, such as education, justice and transportation. Forget about that American high-speed train network, for example. On the other side, Ryan does not cut back a single cent on military affairs, on which the United States spends more money than the next 15 countries (on the list of countries’ military expenditures) combined. And of course, there is another tax reduction included for the rich, who see their highest tax rates drop from 35 to 25 percent.

This is just side information. Now that America simultaneously has the lowest tax pressure since the ‘50s and the greatest concentration of prosperity among the richest (1 percent of the population receives one quarter of all income in the U.S.) since the 19th century, it seems the solution for a large proportion of the budgetary problem should be at hand: Let the rich pay more taxes. This statement, however, is completely taboo. The only thing you can still find a consensus on in this dysfunctional American political system is tax reduction.

Why? As Nobel laureate Joseph Stiglitz argues in Vanity Fair, “Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office.”

Rock-hard poker game

In any case, within Paul Ryan’s own party, some members must have cursed upon hearing his plan. Touching Medicare is very tricky; the older population is the group that has the highest voter turnout. But you have to give credit to Ryan for creating clarity. Most likely, though, his plan will be hidden once the campaign really starts, as it directly shows what this generation of Republicans represents.

Well, not really. Even though the Republican majority promised to focus itself on employment from the start, they seem to have a knack for making a row about ideological pet topics that barely relate to employment, such as cutting subsidies for the public radio and TV broadcasting, quarreling about environmental regulations or even discussing recyclable drinking cups in the cafeteria of the House of Representatives. They immediately replaced these with a Styrofoam model. Last week the budgetary agreement almost failed to go through because some Republicans stubbornly held on to several limitations to the right on abortion, which they somehow had managed to connect to this budget plan.

Note though that last week’s discussions were not that big of a deal yet. Soon the discussions will start on the increase of America’s debt cap. If this increase does not happen (and a lot of Republicans definitely do not want this to happen) the country will not be able to pay off its obligations, which would wreak havoc on the financial markets. Then, the focus will be on the 2012 budget and the Ryan plan. In the mean time, the Republicans will seize any opportunity to throw abortion and any other ideological controversial topic on the table. As shown last week, they are more than ready to play a hard game of poker with it, and for now nobody knows whether they were talking big.

The Democrats better prepare themselves because President Obama has by now shown often enough that his almost pathological tendency to be the Great Reconciler led him to be played by a tenacious opposition. His stimulus program in 2009 was large enough to avoid a new depression, but not to suppress unemployment issues. In part because he did not want to discuss a public system, his health care reform still leaves millions of people uncovered. Last December, he had to allow an extension on George W. Bush’s tax reductions for the rich, something he spent years campaigning against.

It was therefore not surprising to see a rather fanciful spectacle of a president boasting that he had managed to accomplish “the largest annual spending cut in our history.” What he did not say was that it resulted in a 2011 budget that is $38.5 billion smaller than the 2010 budget and $78.5 billion smaller than the proposal he submitted personally several months ago. And all this happens while the Democrats maintained, up to a few days ago, that such budget cuts would be lethal for a slowly restarting economic recovery. Obama is forced to present it as a victory, but he knows very well that it is in fact a major defeat.

The ideological blueprints have been laid out openly last week. From a policy perspective things look very unsatisfying for Obama, but if one does want to be re-elected, one can’t ask for a better party to run against than one that is clearly keen on presenting itself as asocial as possible.