A Lesson from America's Debt Crisis

The U.S. Congress passed a referendum 269-161 agreeing to a new debt limit package to avoid the bankruptcy of the federal government. And, toward the end of the Aug. 2 deadline for saving the country from a situation of default, the Senate agreed to turn that package into law. These laws will later add as many as $2.4 trillion or around Rp 20,200 trillion to the U.S. government’s debt ceiling. Previously, the U.S. debt limit was pegged at US $14.3 trillion (Rp 120,900 trillion).

The debate between the two political parties in Washington over these last few weeks has held the world’s attention. It must be acknowledged that anything that happens in the United States will have a global effect. We still remember when the housing credit crisis struck America and suddenly spread into a global currency crisis. Even now, the world faces a “show” that is not appealing. If the United States reaches bankruptcy, the effect will no longer be a global crisis, but massive global economic chaos.

In America alone, the currency crisis has touched the joints of politics. On the practical level, if the United States experiences default — or fails to pay its debts — that country will not even be able to pay for the implementation of the 2012 presidential election. It can be imagined that the effect of this political angle will form a spiral of political failure that can point toward a dead end. As the main player in the chess game of global politics, the United States’ failure to handle this crisis will actually result in political effects just as severe as the economic effect.

What important lesson can be plucked from the U.S.’s experience? For us, this emphasizes once again that globalization is honey as well as poison for the occupants of the Earth. With globalization, the world becomes increasingly small and integrated, so that it enables us to enhance our quality of life. At the same time, globalization requires fundamental domestic strength, so that national entities are not as easily dragged into the whirlpool of global capitalism. When the U.S. currency crisis of 2008 struck, the strength of the our domestic market proved strong enough to fortify itself from the blows of the crisis.

The maturity of democracy in Washington is also of special note. Following eight months of exhausting debate and negotiation, the U.S. Congress succeeded in passing the package to increase the debt ceiling. Even though Congress is dominated by the Republican Party, the bipartisan politics were applied elegantly by the deadline of the night of Aug. 2, so that the country avoided running out of cash for continuing the operations of the government. In fact, it was possible that this crisis would become “packaged” as a political hot potato exploited unilaterally for the goals of one party.

This historic compromise between the Democrats and Republicans on this issue is not separate from the strength of the leadership of President Barack Obama. Bipartisan politics, the maturity of the democracy and strong leadership have created the momentum to resolve the crisis that previously appeared difficult for them to find a point of agreement on. This U.S. currency crisis reminds us of our crisis in 1998 because the factors are similar — that is, both are federal budget crises. Learning from Washington, Indonesia should actually be optimistic that it will overcome various crises by integrating those three factors.