U.S. Debt Negotiations: Playing with Fire And Kidnapping the World Economy

According to reports, the Republican and Democratic parties have reached a preliminary agreement to avoid a debt default by the United States. Both side’s leaders’ main goal is to document and evaluate their own party’s attitudes in order to answer the biggest question: Will they have enough support from their followers? Bearing in mind the serious consequences of a default and trying to avoid playing with fire, Democrats and Republicans are likely to reach a compromise due to economic and political pressure. However, the struggle to raise the U.S. debt ceiling has fully exposed the fact that the two parties both seek political advantage. Both have repeatedly manipulatively played political games while ignoring national interests and distracting everyone from the larger issues of the world economy. The negotiations over raising the U.S. debt ceiling also reflect the U.S. economy’s long-term strategy of borrowing to get by and living beyond its means, a strategy which has become a major risk to global economic stability.

Over the several rounds of debt ceiling negotiations, both parties have flip-flopped, and it appears that both sides are willing to accept a new program of action. This indicates that the two parties do not dare take the risk of not finding a compromise. A similar situation shows that this scenario is not rare. During the 2008 financial crisis, the U.S. government proposed spending $700 billion to bail out banks. This was the first time that Congress fought within itself. The Dow Jones Index immediately plunged by 700 points. Market pressures forced Congress to vote again two days later, and they finally passed the bailout bill. Earlier this year, the U.S. government’s annual budget was not approved by Congress, which would have forced closures of certain governmental offices. In the final hours, however, the two parties “suddenly” resolved their dispute by reaching an agreement. Behind the negotiations for the increase of the debt ceiling are the same political games that have been played before. It is all about winning votes and then “suddenly” bridging the differences between the two parties at the last minute. Handshakes follow this “tie” in the game.

The negotiations over increasing the U.S. debt ceiling have become a global concern because if the United States defaults on its debt, global financial turmoil follow, and global bond and stock markets will become very volatile. The negotiations between the two parties are attempts by both to gain political advantages against their opponents. Both are totally disregarding the fact that the United States is the world’s largest economy, and they are ignoring the status of the U.S. dollar as the international reserve currency as well as the responsibilities which come with this distinction. They also completely ignore the serious consequences expected if the U.S. defaults, not to mention the national debt held by U.S. assets and the security and economic stability of the U.S. itself. The Democrats and Republicans are playing a dangerous political game with U.S. interests and in the process, have kidnapped the world’s economic stability.

The United States has long had a fiscal deficit, using a strategy of financing debt with even more debt, and the problem becomes more serious with every passing day. Even if these negotiations can raise the debt limit temporarily to eliminate the risk of default, the U.S. does not seem able to wash its face and tidy up its finances. It appears dependent on the status of the dollar as the international reserve currency and exclusive, low financing costs in international financial markets. The U.S. has continued to push to make ends meet and has ultimately given the country an ever-heavier burden debt. With the difficulty of the process of reform, the slow recovery of the financial sector and a manufacturing industry that cannot flourish, it is hard for the U.S. to have an optimistic economic outlook.