The Worst Deal in the World

U.S. policy has suffered a tremendous shock. The consequences of the doomed debt agreement have yet to unfold, but the ghost of the great crisis of 2008-2009 has returned to haunt the U.S. According to some analysts, there are dismal signs which predict a great global storm. The worst deal of the world is also the worst deal for the world. Recession, inflation, unemployment, bankruptcy. But within politics lies the worst threats of crying and teeth gnashing.

In 2008, a situation returned which had not occurred since 1929, where the American economy is neither predictable nor completely reliable. The downgrade made by a known risk agency has a delayed effect. The agencies are starting to sound the alarm three years after the padlock was broken.

The crisis that has unfolded now has another source: the United States, which cannot inspire confidence in its much touted political stability. While looking at the stock exchange and the notes of the risk rating agency, the elephant of the ultra conservative tea party movement weighs on the majority, who may still be unaware of its weight.

The political process has acquired a new dimension due to the outcome of the negotiation sponsored by a president who became hostage to a minority and did not know how to deal with its threats. With the necessary changes made, President Obama signed its Treaty of Versailles. Just as the German commanders attempted to sell the idea that humiliation at Versailles was a victory for those who wanted an end to World War I, President Obama, at any cost, was satisfied with the deal that ameliorated the risk of default. However, by eliminating the default, the president has created new nightmares.

President Obama’s contingency plan contained some traditional alternatives, such as the act of simply issuing more money to pay the debt — a dangerous solution, as it would lead to high inflation. Between inflation and recession, President Obama chose the latter with unemployment as an anchor.

Invoking the 14th Amendment of the United States Constitution as a justification to raise the debt ceiling by decree without asking Congress would have been a bold move. President Obama dismissed the option claiming his lawyers had advised him against it. This clearly demonstrates that the president did not seize the moment he had and did not take the stance that other presidents would have taken when faced with acute critical junctures. They took bold decisions that led to reinterpretation of the laws by the Supreme Court itself. It also seems that President Obama did not understand that the presidency of the republic is too important a post to be limited by lawyers.

Obama still seems to understand even less how the political game has changed with the entry of the tea party on the scene, whose trademarks are intolerance, prejudice and xenophobia. Its political representatives are aggressive, armed and dangerous. Its expressions of old political vices are packed under the guise of defending American traditions.

The tea party controls a portion of the Republican Party, but has shown that it holds enough of the social base to demoralize bipartisan initiatives. In situations where the government is classified as divided i.e., the president is of one party and the majority in the Congress is of another party, a middle ground is usually sought. However, with the advancement of the tea party, it appears that this process is over.

Obama did not consider default to be a possibility, while the tea party did. What does this mean? While these ultraconservatives were able to bring the country to the brink of default, they maintained the offensive, and placed the president on the ropes, beating him mercilessly. If one rejects the hypothesis as equally valid, President Obama opened the gate. He took the position that anything would be better than default.

Days after the deal, there was no longer certainty. A pessimistic absolutism emerged regarding the possibility of the economy recovering and improved accounts in the public sector. The United States is structurally dependent on elevated public deficits. At a time when putting resources into the economy is badly needed, the U.S. is suffering from one of the worst spending cuts in history.

Why was the default not really an alternative for President Obama? Strictly speaking, for the United States it is heresy in terms of economic prescriptions. But there is one more concrete reason. If default were an option, President Obama would have been placed in the same dilemma: Charge the rich or the poor? In the situation of default, the president would have to decide on an essential policy: With less money than necessary to cover all of his obligations, which is a spending priority? Paying interest on the debt and war spending? Or allocating resources to social programs and spending to fund the middle class? Guess which one he will choose.

Through trial and error, Obama is finding that the agreement provides him with enough fuel to refuel for the next elections. It’s like putting a car in park on a hill. President Obama thinks that he will be able to blame the ultraconservatives for problems that have doubled in size from this point. His next campaign will be the same as his 2008 platform, which has been preserved in a bag.

But even the Democrats are not convinced of this. Half of their deputies voted against the deal. The other half voted in favor of guaranteeing approval. The legislators who did not take a stance publicly declared themselves constricted in accepting a situation that shows that the government opted to aid the richest and disregard the poor.

Governing for the rich and ignoring the poor and middle classes was President Obama’s accusation against Bush and the soundtrack of his emotional speeches. Now it has become the poison that the Democratic president not only drinks but toasts to the American people.