Romain Brunet
The American Debt : a risky strategy pursued by the Republicans
Can one expect to see an agreement on a new ceiling for the American debt before August 2? The days go by and negotiation seems at a standstill between the White House andtheRepublicans, now in a majority in the House of Representatives. President Barack Obama, Treasury Secretary Timothy Geithner, President of the Federal Reserve Ben Bernanke, and the rating agencies Moody’s and Standard and Poor have all forwarned : default of payment on the part of the United States would have grave economic consequences for the counry and the world at large.
Over and above the debt problem, it is a power battle that has been at issue for the lastweeks in Washington. The Republicans have demanded that the American President agree to lower expenses in return for a higher debt ceiling. Barack Obama has accepted this principle and was ready in July, to agree to a deficit reduction of 4 000 billion dollars over ten years with 3 000 billion in budget cuts and 1 000 billion in increased income.Unacceptable for the opposition, which will not hear of increased taxes.
Eric Cantor, elected member form Virginia and nuber 2 of the Republican group inthe House of representatives, has become something of a hero for the young newly elected out of the Tea Party stream, seeming at times to take the place of John Boehner, Speaker of the House. The latter arrived in Congress in January firmly committed to reducing government spending and are ideologically opposed to any augmentation of fiscal pressure. «It would be nonsense to impose higher taxes on Americans in an economy such as this one, argued Mr Cantor, Friday July 8. We will not raise taxes, do not have the backing of the electorate to raise taxes» he repeated, Monday July 11.
PRECEDENTS IN 2011
As with Republicans claiming Tea Party allegiance, Eric Cantor is proving to be intransigent on this question since beginning negotiations with the White House, thus risking putting the United States in a default situation. «There is only one person who has not made the slightestconcession, bemoaned, Wednesday July 13, Democratic Senator Charles Schumer referring to Mr Cantor. One cannot let Eric Cantor decide everything. If Eric Cantor decides everything, I am afraid we will go into default.»
It is not the first time that Republicans have proven to be inflexible this year. During discussions on the 2011 budget, in April, they had obliged the Democrats to cut expenses, waiting for the last minute before sighning an accord and coming close to a paralysis of the federal government, a ‘shutdown’.
Minnesota, for its part, was not able to avoid a shutdown, on July 1. The Democratic Governor and the Republicans controlling the local Parliament unable to come to an accord on the State budget, government had to stop, leading to closing administrative services. parks, autoroutes and making technically unemployed twenty-two thousand employees, reports the New York Times. As is now the case for Barack Obama and the Republicans in Congress, Mark Dayton came up against a refusal on the part of Republicans in his State to augment taxes. Paralysis in Minnesota lasted two weeks, until the Governor finally gave in, Thursday July 14.
Eric Cantor is hoping to get the same result from president Obama. But the impact of a defult on the part of the United States would be greatly more negative thatn a ‘shutdown’ of one of the federated States. As much for Republicans as others. This is essentially what declared, Wednesdy July 13, Senator Mitch McConnell, leader of minority Republicans in the Senates and author of a counter-proposition to permit upping the debt ceiling. «I refuse to help Barack obama get re-elected by pushing Republicans to become responsible for a bad economy», he stated, adding that such a strategy had failed in the past.
In 1995, The Republicans, who controlled Congress, had in effect opposed Democratic President Bill Clinton on the financing of a number of federal programs, leading to a paralysis of the Federl State between November 14 and 19, and then from December 16 to January 6 1996. « The reason why a default is no better an idea now than had been that of Newt Gingrich in 1995, is that it destroys your image..(...) That had helped Bill Clinton get re-elected and I do not wnat to helf Barack Obama», warned Mr McConnell.
The warning on the part of the Senator from Kentucky does not seem to have been heard. Republicans in the House of Representatives thus announced, Friday July 15, that they would vote, Wednesday July 20, a plan to up the ceiling accompagnied by an amendment to the constitution to impose a balanced budget. The proposition would lower federal expenses by 2 500 billion dollars and would limit administrative expenses to a percentage under discussion. A plan which Barack Obama has already rejected, and has qualified as «not serious».
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