A Debt Is No Hollywood

In the scenario of a Hollywood film, the tension builds up until the very end, until good wins over evil, which should happen literally in the very last moment, writes our New York correspondent, Tomasz Deptuła.

Preferably just a few seconds before a global catastrophe, disaster is averted. And then everybody lives happily ever after.

The argument over the debt limit in the United States only seemingly resembled such a scenario, despite the fact that after the agreement was announced, the world sighed with relief. That’s true: Just a few hours before — at least partial — insolvency of the U.S. and potential catastrophe on the global markets, a compromise was finally reached. However, a happily ever after in which everybody lives in happiness and welfare won’t happen.

The dispute has shown the depth of the political divisions in the U.S., compared to which the Polish conflict between the PO and PiS parties is only a kids’ argument over the toys in a sandbox. It has shown the dysfunctionality of the system in a situation where one party shows no will to compromise because of their ideology. The blackmail strategy used by the radical wing of Republicans from the House of Representatives, connected with the tea party, challenged the fundamental rule of the American democracy based on the checks and balances principle.

The sense of failure among the Democrats is also too serious. Barack Obama’s approval ratings are low; the consent for raising the limit of public debt by $2.4 trillion in return for expense cuts was forced by the new politicians of the right, who demanded cutting expenses, lowering taxes … and even liquidation of the central bank at the same time.

The problem is that the United States in fact has an enormous public debt. In the long run it cannot be repaid only by means of cutting expenses — the revenue of the country will have to be increased. The Republicans, with dignity worthy of a better cause, want to die today for tax incentives introduced in the days of George W. Bush, which drove the U.S. into this hole. This happens when almost half of Americans do not pay income tax and the wealthier citizens have almost limitless possibilities to creatively bypass the rules. The present compromise does not guarantee any change to the system which could help lead the country out of the difficult situation.

Internationally, the unpredictability of America once again hurt the image of the United States. While almost all economists asserted that agreement was not possible because the stakes were too high, the financial world found itself on the verge of panic. The exchanges were low. The situation of the dollar was similar. Its role was questioned by the IMF’s new chief, Christine Lagarde. It remains the global reserve currency almost exclusively on the basis of negative selection; the euro zone is experiencing even more trouble, and Japan with its yen tries to recover from the tragic earthquake. (This role will not be also assumed by Japan because, frankly, the economy of this country is too small to meet the needs of the financial system.)

If the Americans cannot get along peacefully with each other while leading financial markets over the brink of disaster, then why do they want to rule the world? The authority of the country as a global superpower has been steadily weakening. And after what we have seen in the recent weeks, it is difficult to believe in the Hollywood happy ending in Washington.