American Dream?

The United States is at a crossroads: They need more capital for investment and with it, to get the economy going, but they can’t increase the level of borrowing by too much — it hit the legal limit this month, reaching $14.3 trillion (R$23.2 trillion). The deadline for a decision on this is Aug. 2. Until then, President Barack Obama will need to find a formula to shut up the Republicans: They want to tie the increase in the debt ceiling to deeper budget cuts, a possibility the Democrats reject. Today, the ones controlling the House of Representatives (equivalent to the Chamber of Deputies in Brazil) are the Republican opposition.

If that whole situation were a game of chance, the bet would be that the Americans were going to go further into debt and increase their fiscal and commercial deficits. The explanation for this inclination is simple — the elections next year.

On that point, yet again the Obama government faces a new dilemma: If he doesn’t raise the debt ceiling, he can face a reaction from the market and trigger serious damage to the country’s economy; but if he allows this change, he will be on the verge of a new crisis. Many are already saying that the high level of American borrowing ought to cause turbulence worse than that seen in 2008 with the subprime. A new crisis can be fatal to the world’s largest economy: Last week, the Department of Commerce confirmed that U.S. growth decelerated in the first quarter of 2011. In the first three months of the year, the Gross Domestic Product increased at an annual rate of 1.8 percent, confirming the number released the previous month. In the fourth quarter of 2010, the American GDP had increased 3.1 percent.

The reverberation of a new crisis through an economy that’s already slipping would bury the American dream of restructuring for good and would drag down all of the other economies in the world. This scenario would be devastating because Europe is already fighting its way out of the chaos it found itself in at least two years ago. And, again, to have emerging markets as the global economic motor is to count more on luck than experience. What’s certain is that if Obama wants to continue to lead the country, he will have to make the American machine work. But that is not a task for just anyone.