America Is Out of Joint

Winston Churchill, the master of cutting remarks, once noted: “You can always count on the Americans to do the right thing — once they’ve exhausted all other possibilities.”*

Those words come to mind these days, when the world’s largest economy, by the narrowest margin, escaped a federal bankruptcy that would have had devastating consequences for the global economy.

After ballots in the House of Representatives and the Senate, and with only hours left to midnight of Aug 2 when the money would have run out, President Obama was able to sign a bill that by increments will raise the debt ceiling, the maximum amount that the United States is allowed to borrow, by $2,100 billion from its current level of $14,300 billion.

In addition to that, the budget deficit — currently 10 percent of the GNP — is to be cut by $2,400 billion over a 10-year period. It is hoped that these measures will bring a runaway national debt, amounting to 100 percent of the GNP, back under control. But the deal, which was forged under terrible tribulation, has its flaws and the financial market, already shaken by the euro crisis, was not impressed.

Firstly, the larger part of the cuts will be negotiated by a committee made up of three Democrats and three Republicans. Given the deadlocked character of current American politics, it’s hard to see how they would be able to get along.

Secondly, the decrease in the budget deficit is insufficient to restore the stability of the government’s finances. It represents only a little over one percent of the prognosticated production for the coming 10 year period. Most analysts, including the credit-rating agencies, are of the opinion that the deficit has to be lowered much more. For the first time, Standard and Poor’s has lowered the United States’ credit rating.

Thirdly, the credibility of the decision is weakened by the fact that it doesn’t contain any income boosts, i.e. tax increases. Originally, President Obama wanted a “balanced” solution, with raised taxes for the most well off, but the Republicans refused to accept that.

Any attempt to solve America’s financial problems without tax increases is ludicrous. The United States has a low pressure of taxation compared to other countries. As of today, barely 15 percent of the GNP goes to taxes, the lowest level since 1950.

In particular, the tax cuts for high income citizens pushed through by George W. Bush has given the American system of taxation an almost grotesque profile. Warren Buffett, one of the richest people in America, noted the other year with some alarm that he paid an 18 percent income tax while his secretary paid 30 percent.

The situation is also exacerbated by America’s slow recovery from the financial crisis and recession of 2008-2009. The growth rate is anemic. Last Friday, the figure for the first quarter was adjusted down from 1.9 to 0.4 percent.

The official unemployment number has rooted itself at a bit over nine percent, but the real number is almost twice that, since the statistics don’t take into account people who have stopped looking for work.

And in a situation where cuts in public spending are necessary, the United States has a huge need for investments: when World Economic Forum evaluated the quality of the infrastructure in 139 countries, the world’s richest country was found in 23rd place.

How Could This Happen?

Part of the answer is that transgressions in the past have allowed the United States to live beyond its means. As early as the 1980s, during the Reagan administration, the United States went from being the world’s largest creditor to being the world’s largest debtor.

Another part of the answer is that the American political establishment has become dysfunctional. Like a giant Greece.

The more-than-200-year-old American constitutional model, with its balance of power and strong protection for minorities, depends on responsibility and pragmatism. But the radicalization of the Republican Party which has fallen into the hands of the paranoid and racist-flavored tea party movement has poisoned the cooperative climate.

In last year’s election for Congress, the Republicans gained the majority in the House of Representatives and narrowed the gap with the Democrats in the Senate. As a result, they can practically hold the nation hostage.

Their Behavior is Completely Irresponsible

President Obama was initially prepared to make far-reaching concessions, including large cuts in spending and only minor income boosts.

The Republicans still said no. David Brooks, himself a conservative, pointed out in the New York Times that a normal party would have jumped at the opportunity to transform the economy in an orderly fashion. But, he added, the Republicans are no longer a normal party.

The Republicans’ resistance to tax increases and to any initiative aimed at diminishing the glaring social injustices in the country has — as in the case with Obama’s health care reform — turned into blind rage and absurd accusations about “socialism” and “un-American values.” During the negotiations about the debt ceiling it went so far that the usually level-headed Barack Obama stormed out of a meeting with the House majority leader Eric Cantor, saying,

“I have reached my limit. This may bring down my presidency, but I will not yield on this.”**

But he gave in, in the end. The Republicans basically got what they wanted. Theoretically, Obama could have steamrolled over Congress and raised the ceiling on his own by referring to the constitution’s 14th amendment of 1868 dealing with the national debt, but that would probably have led to demands for his impeachment.

In one important way, the president has succeeded: the debt ceiling has been removed from the political agenda for the election year of 2012. Still, the image of a weak and retreating president has settled in the public mind.

According to a poll conducted by the Pew Research Center during the second half of July, 41 percent want Obama to be re-elected next year, while 40 percent prefer a Republican president. Even as late as May, Obama had a lead of 11 percentage units. A particularly bad omen for the president is that independent voters that decided the 2008 election for him are now abandoning him.

Obama’s supporters often, with slight exaggeration, point out similarities between him and Abraham Lincoln and John F. Kennedy. But in the conservative camp he’s usually compared to a president that was indecisive and slightly perplexed.

Democrat Jimmy Carter was elected in 1976 after Vietnam and Watergate, but was buried four years later in Ronald Reagan’s land slide electoral victory. A protracted hostage situation in Iran in combination with a weak economy and a high inflation rate proved too much. At two points out of 10 possible, Carter falls into the second lowest category in a recent study “Among the donkeys and elephants,” where Claus Stolpe at Åbo Akademi University systematically evaluates all of the United States’ presidents.

The Carter-Obama comparison is not fair, however. Obama has an ability to inspire that Carter lacked. And at certain decisive moments — like the enormous economic stimulus package of 2009 and the raid against Osama bin Laden earlier this year — he has proven much more decisive than Carter.

As a Matter of Fact, Obama Can’t be Compared to Any of His Predecessors

His election three years ago gave the United States its first black president. Against the background of America’s sombre heritage — slavery, lynchings, racial segregation — it was a magnificent and unique event. But a part of America was not ready for a black president, and it is that part that has taken over the Republican Party.

Hence the unreasonableness. Hence the urge to humiliate the president. Hence the constant questioning of Obama’s worthiness and legitimacy. And just as expected: it is almost exclusively among white voters that the Republicans are gaining support. The economic crisis obviously contributed to the excited atmosphere, but the rebellion of the angry white men provides an underlying explanation for why a routine decision suddenly turned into a tragedy of fate.

The debt ceiling has, after its introduction in 1917 when the United States needed to finance its entry into World War I, been adjusted 78 times, 49 times by Republican presidents and 29 times by Democratic ones, without it leading to convulsions. But a Republican Party moving further and further out on the right wing went into complete paralysis when they saw a black man in the White House.

On the other hand, this is Obama’s chance for 2012: The Republicans are forced so far out to the right by the tea party movement and the fundamentalist Christian right-wingers that they might nominate a lunatic, like Michele Bachmann from Minnesota. Last Monday, she voted against raising the debt ceiling.

When push comes to shove, American voters usually abhor extremism. May they once again, after many twists and turns, do the right thing. For their own sake and for the world’s.

* Editor’s note: Exact quote could not be verified.

** Exact quote could not be verified.