The US Has a Plan

The president of the United States demonstrated for a long time an unwillingness to step onto the path of “austerity”. The EU’s negative experience seemed to disconcert him only partly: The main reason was the understanding that this path would make the economic situation worse and significantly lower the standard of living in the country. Circumstances left Obama no choice. He warned that the budget sequester will affect many Americans of the “middle class”. He blamed the Republican opposition for being unwilling to make a more balanced decision – but he stepped back. The order on $85 billion worth of budget cuts has been signed.

It is not the first year that a dispute around the budget and financial politics has divided the Democratic and the Republican parties. After a series of victories on the part of the opposition in the fall of 2012, the U.S.’s Federal Reserve System (to the joy of most of the Democrats and their banker-friends from Wall Street) moved on to the third program of “quantitative easing” – QE3. However, in February 2013, QE3 began to quickly lose its effectiveness. The markets experienced a new drop, which is connected to the threat of a great collapse or another moderate decline. As before, the depth of the stock market drop will depend on the scale of financial counteraction measures. If the effort of the Fed is insufficient, the U.S. might make the European Central Bank come to their aid. The method is known as an attack on ratings.

The U.S. is strengthening its budget economy in an extremely delicate world situation. In Europe, the crisis is growing; China is still holding on, but is swiftly losing capital, and many companies are working for a loss. Many countries are feverishly trying to find ways to maintain growth or even maintain their current status. After the failure of China’s attempt to be the new locomotive for world economy, eyes have turned to the United States. Their decision to cut down by $46 billion on war expenditure, by $28.7 billion on various internal projects and about $10 billion on medical insurance programs seems strange. Will this country not stimulate its market? Will the United States not pull everyone out from the new mud?

Obama’s administration has a plan. It has had one for a long time. The Democratic administration strives for an export re-industrialization and for a victory over the problems of its economy without rejecting a neoliberal policy. It differs depending on whether it is implemented by Republicans or Democrats. However, the latter must more and more often give in to the pressure of the opposition, who demands hard money, a decisive reduction of the cost of the work force and a budget economy. They would prefer to cut down social expenditures more decisively, but sending more than a hundred thousand civil servants from the defense department on unpaid leave is not convenient for them either. It is possible that they are less content with suspending the maintenance of many military courts. But they are still counting on getting their way.

In the negotiation process concerning the budget sequester, the Democrats and the Republicans were set on preserving expenditures. Both parties need a position for the public. The Republicans do not want to raise taxes for business, while the Democrats are not on the side of the “average American” to the extent of completely rejecting a budget economy. They nevertheless tried to shift the emphasis of the cuts onto war articles and to introduce a tax for people whose income exceeds $1 million. Obama is still waiting on some “common sense” from the part of the Republicans. However, criticizing them for their unwillingness to “not close a single loophole, not raise any additional revenue from the wealthiest Americans or corporations who have a lot of lawyers and accountants who are able to maneuver and manage and work and game the system”, Obama should also look at himself. What was he busy with before? How did it happen that after his election, Congress was taken over by the opposition?

Obama was elected the second time as the lesser of two evils, but not as a creator of a new course of action. He did not save the economy – he merely gave it an expensive repose. The U.S.’s increasingly significant adoption of the European practice of “austerity”, according to analysts, threatens the economy with a loss of 750,000 jobs owing to the winter sequester. There will be no disaster because of it, but those who are hoping for an American recovery of the world economy should prepare themselves for a different scenario. The United States will attempt to create the conditions for an industrial market, both for the price of reducing the cost of the working force as well as introducing new technologies (from transport to energy). As a result, they may strike a blow for other markets. They will be capable of abolishing the previous system of the division of labor. However in the meantime the U.S.’s significance in maintaining a financial balance will fall.

In the next year, perhaps year and a half, Washington will try to preserve the previous monetary policy. The economy will strengthen, but the standard of life in the country will, as can be expected, fall. Regardless of any revolutionary decisions in the American industrial sphere (which should be expected), the U.S. will influence markets in different ways. At present, they will probably not be able to stop another drop in the stock market.