The Political Consequences of The American Debt Ceiling Talks

When Tip O’Neill was asked, as speaker of the House of Representatives under Reagan, what, according to him, had changed in Congress between 1950 and 1980, O’Neill responded: “The people are better. The results are worse.” It seems that this observation is even more evident today. The quality of political leaders has probably increased, but it is more and more difficult to pass reforms and major laws, or even to negotiate an agreement, however essential to the survival of the United States.

The ink from the U.S. debt agreement is still wet as all the observers scramble to take stock of the “winners” and “losers” of this political fight. The goal for each party is to show that they have lost less than the other party, since it is hard to get everyone to agree on the impact of the standoff. However, some lessons can already be drawn at three levels.

In the short term, everybody loses. Barack Obama is being criticized by the left for having sought a compromise with Republicans and for having abandoned one of his priorities (increasing taxation on the wealthy); Obama has been criticized by the right for his expensive policies and for not having cut the American budget enough, particularly social programs. John Boehner, as current speaker of the House of Representatives, needs to simultaneously provide leadership to manage the House and espouse compromise to pass legislation. Yet the compromise complicates the House’s current political climate because of the obstructionist attitude of several congressmen — particularly members of the tea party — who oppose any agreement without the presence of drastic cuts, as well as limitations of the role and the spending of the state. According to a survey conducted by the Pew Research Center and the Washington Post, the words most often cited by Americans to describe the debt debate are “ridiculous,” “disgusting” and “stupid,” and all of the political parties are held responsible for this situation.

In the middle term, the United States has avoided disaster (and all of the consequences that would hit the global economy if the U.S. defaulted on its debt), even if the debt compromise remains imperfect. President Obama had two goals: to prevent a payment default and to ensure that this problem does not come back on the table before the 2012 elections. The Republican side was more concerned with preventing the Democrats from raising taxes while goading them to reduce American debt through major budget cuts. For both sides the objectives were ultimately achieved; it was hard to expect more.

The bipartisan committee in charge of identifying any subsequent budgetary cuts will have to agree on a plan. Otherwise, most of the “trigger cuts” will primarily affect the Department of Defense (which Republicans seek to avoid at all costs) and social programs (programs that Democrats refuse to let go) — so both sides have enough incentives to reach an agreement.

In the long term, the function of the American political system comes into question. Admittedly, this has become an issue of exploitation by American politicians, notably those in the radical fringes, like the tea party — a crucial issue that has shown its limits. The scorched earth policy, brought to its apogee so that both parties set their election base’s minds at ease, has eventually led to a shaky and lackluster agreement. Still, it is not hard to see that the system of “checks and balances” forced the American government to negotiate an agreement for the increase of the debt ceiling, and then discuss the issue publicly before the situations worsens.

How can we not see a limit to excess and to blank checks in this game of political counterparts? Isn’t it not better to face a political crisis on how to avoid an economic crisis than one on how to reverse an economic catastrophe? This prior discussion avoids, or at least limits, the risk of the country to find itself at an impasse of bankruptcy. Does the much-decried United States have any advice for its European counterparts?