The United States: A Crisis Postponed

Proving pessimists wrong, the United States managed to come to a halt at the edge of the fiscal cliff at the very last second. It has not, however, backed away from it. The upcoming budget deadlines will put it in a similar position in a few months.

The Republican majority in the House of Representatives had the decency to accept the motion that had passed in the Senate with an overwhelming majority. The worst had been narrowly avoided by Tuesday, only a couple of hours before the stock market reopened. The market, lifted of a heavy weight, climbed steadily yesterday. The main American indexes shot up considerably.

This will be a short-lived interlude. The bomb has barely been defused; others are starting to make themselves noticed.

The first is a side-effect of the newly-avoided crisis: automatic cuts of $110 billion in public spending, delayed for 60 days, will clearly have to be revisited in the near future. The need to cut spending is obvious, as are the illogical blind cuts. What will be put on the chopping block remains to be determined. Washington is about to get bloody: Democrats are demanding tax hikes as a response to the decreases in public spending.

The second bomb is firmly strapped to the debt ceiling. Since the $16.4 billion limit was reached earlier this week, the Treasury has taken emergency measures in order to let the administration continue doing its job. They have barely two months left of autonomy. If elected officials refuse to reach an agreement to raise the debt ceiling, the United States will find itself bankrupt.

Déja vu? Yes, a film covered this all in the summer of 2011. It was a big scandal. What comes after, however, threatens to be even more dismaying. The United States has more to lose than it did 18 months ago. The economic indicators are encouraging, now isn’t the time to let everything derail. Unfortunately, judging by what we’ve seen over the past weeks, this view is not held by many.

The tax hikes that went through on Tuesday are less fruitful than those that Obama promised during his electoral campaign. His target was family incomes surpassing $250,000. The agreement gives breaks to households making less than $450,000. This compromise is not to be ignored; it is the first bipartisan tax increase since 1990. This is certainly a victory for the president — and radical Republicans have every intention of making him pay.

The United States has bought some time, but the game isn’t over. The budget deadlines in the upcoming months will be rich in sterile conversations and moments of cheap suspense. Don’t hold your breath, Republicans and Democrats will no doubt manage to avoid the worst. A job well done… by giving themselves such low aspirations, they are ignoring the truly pressing task: To clean up public finance.