The Sequestration of the United States

Having passed the second tax cut earlier this year, Congress and the government of the United States have been unable to come to an agreement to avoid the so-called budget sequester. “Sequestration” is the enactment of an indiscriminate and disproportionate budget, deliberately designed by both governmental factions, to pressure them into a rational resolution to reduce the fiscal deficit. However, despite the threat of self-imposed punishment, agreement was impossible. The current solution: $1.2 trillion in budget cuts to be implemented in the next 10 years, out of which $85 billion correspond to the current fiscal year. This result demonstrates three things.

The first is the deep crisis of governance experienced in the U.S. Constitutionally, the U.S. system of checks and balances should entice powers to cooperate together, since to oppose would be to block any decision making. But in times of extreme political and ideological polarization like the current situation, cooperation is not possible. The only way to guarantee the decision-making process under these circumstances is to have the majority of Congress coming from the same party as the leader of the White House. However, this has only occurred during eight of the last 32 years. Thus, the crisis of governance only disappears when one of the two parties decisively imposes on the other.

The second thing this stalemate demonstrates is that the United States, following Europe’s example, is entering in a clear phase of fiscal austerity. Washington is preparing to reproduce the eurozone policies even though the European austerity measures are a result of a macroeconomic straightjacket and an inability to control its currency, totally unrelated to the U.S. economic reality. This, despite warnings at the beginning of last week by Ben Bernanke, the chairman of the Federal Reserve. For Ben Bernanke the problem with the American economy isn’t that the government is spending too much, but rather that it isn’t doing it in an effective way. Moreover, because of this, the application of these contradicting budgetary policies will not only affect employment recovery but also the economy itself, making it more difficult to reduce the fiscal deficit.

The third problem this situation demonstrates is that the Republican Party lacks alignment with the reality of its country. A country where the wealthiest 400 Americans have a combined wealth greater than that of 150 million of their poorest countrymen and where the top 1 percent is richer than 90 percent of their fellow citizens. In this country, Republicans continue attempting to save the elite from paying more taxes. Hence, this issue has developed into a fundamental part of the disagreement around reducing the fiscal deficit. Unsatisfied with having alienated the majority of Hispanics, blacks, women and young people, the Republicans are also going against the middle class. This seems to secure for them an inevitable decline.