Fiscal Catastrophe

On Oct. 1, the federal government of the United States partially ceased its operations in many of its offices and departments because the House of Representatives, dominated by a conservative Republican majority and in opposition to the current administration, did not pass the proposal corresponding to the 2014 fiscal year.

This radical Republican opposition in Congress stems from an aversion to Obama’s health care reform passed in 2010. The reform is scheduled to take effect on Jan. 1, 2014. Its main purpose is to provide access to basic medical care for all citizens living in the country, something similar to universal insurance enforced in Bolivia. Additionally, the reform requires that all businesses provide insurance to their employees through an occupational health plan.

The fiscal block in Congress, which seems more like a form of blackmail in order to impede the realization of the health care reform, may have systematic consequences in the global economy. Since 2008, the global economy has been in a permanent state of collapse. This economic breakdown was also caused by the irresponsible financial sector of the United States and is mainly noticed in European economies, as well as in those of some emerging countries. At the same time, the crisis could become worse, as the United States may not be able to honor the payment of part of its external debt due in October.

In summary, the outlook is bleak on the economy and financial turbulence accompanying it. Faced with the chaotic scene in the United States, it is necessary that some contingency measures be taken — beginning with the federal government — in case the Republican obstinacy in the U.S. Congress maintains the fiscal block.

It is a priority of the national economy to balance its public accounts in the treasury, taking precautions to achieve a fiscal surplus. Similarly, maintaining a position of liquidity is desirable in order to avoid the creation of inflationary pressures — incidentally, the cumulative inflation rate for September reached 5 percent. All in all, it would be prudent for the government to maintain a sound policy for internal reserve accumulation, thereby creating a kind of insurance against any economic or financial “accident” caused by either internal or external sources.

It seems that October is an emblematic month for economic and financial issues. It was precisely during this time of year when, in 1929, the events that changed the dynamics of world economic growth occurred, converting the economic cycle’s paths of growth into subsequent world recessions and depressions, all of which originated in the United States. Now, a fiscal catastrophe is possible, originating once again in the country up north.