They’re Not That Foolish

U.S. government bondholders have breathed a sigh of relief. Stepping out into the White House Rose Garden, President Obama informed journalists that he had signed the law allowing the U.S. government to borrow another $2 trillion over the next two years. This means that, at the last minute, the United States avoided default and will continue to fulfill all of its debt obligations. And, the country will maintain its high credit rating.

It seems that this would be a reason to boisterously celebrate and demonstrate America’s characteristic optimism. However, oddly enough, neither the New York Stock Exchange nor the general public has displayed particular enthusiasm about avoiding default, rather the contrary: The Dow Jones was in the red while the public was out and still is!

On Thursday night, CNN/ORC polled 860 adult Americans by telephone, asking them what they thought about the Washington default extravaganza. Seventy-seven percent of the respondents stated that the politicians behaved like “spoiled children.” In addition, the approval rating of Congress was a mere 14 percent!

Americans divided according to party lines on essentially the same question, that is to say, on the decision to raise the debt ceiling. Sixty-eight percent of the respondents were displeased with the Republican position of reducing government expenditures (i.e. on Medicaid/Medicare) and maintaining the tax rate for the rich. However, 63 percent were displeased with the Democrats, who, in contrast, want to increase the tax rate for the rich and corporations in order to raise the standard of living for lower-income families. Characteristically, 53 percent disapproved of the president’s position.

What do these numbers tell us? First of all, they show that in addition to an economic crisis, the United States has entered a deep institutional political crisis. The system of checks and balances — a former role model and object of historical pride — has begun to operate destructively. Even President Obama himself admitted this when he announced for the second time that Americans had voted for a “divided government,” not for a “dysfunctional government.”

But as Chernomyrdin said, “We meant to do better. …”

This would appear to be a small thing. Well, the Republicans won the majority of the House of Representatives in 2010, yet the president (i.e. the Executive Branch) and the majority of the Senate are Democrats. And this “small thing” played a fatal role in this mayhem, putting the president and Congress in a foolish position before the respected public.

If public sympathy had not swung in favor of Republicans in only a few districts, then the Democrats would have been able to maintain control of the House and the question of raising the debt ceiling would have been resolved automatically, as it had been several times in the past. However, what can be done? The voice of the people is the voice of God. A democracy is the worst form of government, except for all the others.

And look at how the House Republicans have seized their chance: They have used their slim majority to torpedo the Democrats’ program and promote their own, even in the form of another constitutional amendment. In terms of pure politics, they have acted absolutely correctly. While their chances of winning the 2012 presidential elections are practically zip, their one intention is to undermine and discredit their opponents, even by threatening default.

Of course, at the last moment they came to a compromise — they are not foolish enough to really take that risk. But the nerves of domestic and global investors are totally exhausted. And now the lawmakers are on vacation. To rest after this draw is cruel and makes no sense.

But tomorrow the fight will begin again.

The show must go on.