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US debt ceiling: The Whole World is Watching

…and responding to the American debt ceiling/budget drama.  Foreign Policy has a choice collection from around the world:

China:

State wire service Xinhua expressed its dismay at the potential of a default in the run-up to the final debt decisions, calling the political brinkmanship in Washington “dangerously irresponsible” in an editorial last week and noting that the “ugliest part of the saga is that the well-being of many other countries is also in the impact zone when the donkey and the elephant fight.”

“The US is well-known for promoting rules and regulations to other countries, but now countries are increasingly realizing Washington can stamp all over its own rules and regulations,” the editors write.The piece goes on to speculate that U.S. instability could lead the country to lash out militarily at its rivals. “When the country prospers, it will use more civilized methods to secure its national priorities, but when it faces a crisis, it will use all methods to defend itself.”

Greece:

The Greek broadsheet Ekathimerini writes that the United States today “displays all the signs of decadence that condemned all previous superpowers: Stability and prosperity allowed small groups to gather disproportionate power, and they then forced the state to serve their interests at the expense of those of society as a whole.” Much like Greece, the editors write, the United States is now “paying the price of complacency.”

Ireland:

The Irish may still love Barack Obama but Lara Marlowe, Washington correspondent for the Irish Times, writes that despite the deal, “the damage to Obama’s reputation and to faith in the ability of the US to lead a global economic recovery may be irreparable”. Bemoaning the U.S. president’s failure to stand-up to the Tea Party, Marlowe writes that “as the country surveyed the smouldering detritus of the debt crisis yesterday, the Tea Party stood triumphant in the ashes.”

Spain:

El País argues that, “The United States is now in the same basic trap as the Old Continent,” forced to enact harsh austerity measures in order to reduce the deficit, but hampering economic growth in the process. The deal “transmits the message that the policies proposed by the radical core of the Republican Party, the Tea Party, will be an obstacle for crisis management in Washington,” the editors conclude.

Russia:

El País argues that, “The United States is now in the same basic trap as the Old Continent,” forced to enact harsh austerity measures in order to reduce the deficit, but hampering economic growth in the process. The deal “transmits the message that the policies proposed by the radical core of the Republican Party, the Tea Party, will be an obstacle for crisis management in Washington,” the editors conclude.

India:

The Hindustan Times editorializes that “If routine has become Armageddon, the US cannot be counted on when the tough decisions are being made.” That may have security implications, in addition to economic ones. While the current round of budget cuts may be severe, the editors worry more about what will happen to the U.S. defense infrastructure if Republicans and Democrats cannot agree to a second round of cuts, which would trigger $1.2 trillion worth of security cuts: “[S]uch cuts would eviscerate US defence capability. The US would be a greatly reduced superpower, one with little leeway if bits of the world go rancid or sour.

Britain:

In the Telegraph, Toby Young notes the ironythat the Democratic U.S. president now appears to be leaning to the right of the British Conservatives: “A year ago, American conservatives were showering David Cameron with praise for adopting such a radical approach to reducing Britain’s deficit and contrasting him unfavourably with their own spendthrift President. Now, our Prime Minister looks like a weak-kneed liberal in contrast to the hard-headed Obama.” Young believes that on both sides of the pond, a “sea change has taken place” and that “Socialist welfare programmes have become politically toxic.”

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Borderline Governance Disorder

That’s the name  Derek Thompson gives the debt deal charade by Congress in The Atlantic. 

I’ve been away for the past three weeks.  But there was little to write about anyway.  It would be impossible to comment real-time on someone jumping off a cliff, just as it was impossible to blog the hallucinations of Congress regarding the debt ceiling.

Floyd Norris gives a good synopsis  of how the debt-ceiling legislation could deepen the deficit by decreasing tax revenue:

I cannot imagine anyone actually thinking this deal — with its clear potential for another bruising fight and deadlock that will do more to hurt the economy — decreases uncertainty.In fact, this deal could manage to do the exact opposite of what it promises — raise the deficit.

If that happens, it will be because a major determinant of tax revenue is the health of the economy. Profits and growth bring revenues. This could damage the economy enough to send tax receipts down again.

 

 

 

 

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Chickens Come Home: Markets React to Debt Ceiling

This from Marketwatch:

“The market [is] not very impressed, as a U.S. credit rating downgrade still remains a high possibility … despite the U.S. House/Senate both voting in favor of the latest $2.4 trillion fiscal-spending cut deal.”

Not only that, but the US economy is already slowing down and budget cuts are the last thing it needs.

Does the GOP believe that budget cuts and laying off of public workers and cancelling contracts with private enterprises WON’T RESULT IN MORE UNEMPLOYMENT and therefore, further decrease consumer demand?  Does the GOP deny that a decrease in consumer demand WILL DRAG DOWN THE ALREADY FRAGILE ECONOMY?  Does the GOP really think it WAS SMART to block a ROUTINE EXTENSION OF THE DEBT CEILING?  What would the GOP think of a DOWNGRADE OF AMERICAN DEBT THAT ADDS BILLIONS TO THE DEFICIT IN THE LONG RUN?

The GOP caused this crisis by creating DOUBTS THAT THE US WOULD HONOR ITs DEBT COMMITTMENTS.

But WILL THE GOP PAY??

 

 

 

 

 

 

 

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Debt Ceiling Poll: Overwhelming Support for Congressional Compromise

debt ceilingThe newest NBC/Wall Street Journal poll finds Americans still reject partisan gridlock and want leaders to compromise to take action on the deficit and debt ceiling.

When Democrats and independents are asked if they want the Democrats in Congress to make compromises to get consensus on the current budget debate, 65% do and 27% want them to stick to their position.  When Republicans and independents together are asked, 53% want compromise, 42% do not.  38% of all respondents believe the debt ceiling should be raised, compared to 31% who don’t and 30% who felt they didn’t know enough to say yes or no.

55% of those polled believe not raising the debt ceiling would be problematic, only 18% did not.

A clear majority, 58-36% support President Obama’s plans to address the budget issue (cuts plus taxes, 10-years) over the Republicans (spending cuts only).

President Obama is rated favorably by 47% while those who think the country is on the wrong track rose to 67%.

One long-time pollster for Democrats, Peter Hart, and one for Republicans, Bill McInturff, conducted the poll.

 

 

 

 

 

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Norman Ornstein on “Worst. Congress. Ever.”

Norman Ornstein, long-time fellow at the American Enterprise Institute and Congressional scholar with 40 years of experience, contrasts bi-partisanship in past Congresses (even during Vietnam) with a dysfunctional legislative branch today.  His discussion elaborates the difference between a US-type ‘checks and balances’ system and a Parliamentary system, drawing out the corrosive effect partisan sectarianism has on the US model.  Ornstein writes his bleak assessment in Foreign Policy:

Yes, the 111th Congress, during the first two years of the Obama presidency, produced an impressive spate of major legislative accomplishments, from a stimulus package to a sweeping health-care reform bill to major financial regulatory reform. But all were passed after contentious, drawn-out, partisan battles that left most Americans less than happy with the outcomes. And look what we have now: a long-term debt disaster with viable bipartisan solutions on the table but ignored or cast aside in Congress; an impasse over the usually perfunctory matter of raising the statutory debt limit placing the United States in jeopardy of its first-ever default; sniping and guerrilla warfare over two major policy steps enacted in the last Congress, health-care reform and financial regulation; no serious action or movement on climate change, jobs, or the continuing mortgage crisis; and major trade deals stalled yet again despite bipartisan and presidential support.

The Framers saw deliberation, institutional loyalty, and compromise as the only way to produce sensible and legitimate policy decisions in an extended republic. Many Republicans, especially former office holders, understand this. Many of the party’s current members surely would prefer to solve problems, if the culture and atmosphere — and the primary process that gives inordinate power to both parties’ ideological bases — did not make it so hard to do so. But there is little chance that a suitable climate for compromise and bipartisanship will take hold anytime soon — meaning that we can look forward to more headaches ahead at home and abroad.

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Deficit: ‘Gang of Six’ Revive Bi-Partisan Plan

President Obama on Tuesday renewed his push for an ambitious deficit-reduction deal, hailing a bipartisan package put forward hours earlier by a group of six senators as a sign of progress and summoning Congressional leaders for a new round of negotiations.  – New York Times

Stay tuned!

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US Cements China’s Lead on ‘Clean’ Coal

In a stunning example of how the political climate today shoots US economic growth in the foot, little beats today’s American Coal Company’s decision to shelve development of a $668,000 coal plant that captures and buries carbon dioxide using state-of-the-art  technology.   According to the New York Times, although the federal government agreed to back half the cost of the plant, “…A.E.P said it was unwilling to spend the remainder in a political climate that had changed strikingly since it began the project.”

The company itself advocates CCS (carbon capture and sequestration) technology and believes it will be needed to meet emission standards in the future.  However, because the federal government has not passed rules that would set a common standard for coal-burning plants across the country, state regulators won’t allow the companies to recover their expense.  In a jobless recovery, no politician wants to be accused of supporting ‘regulation’ that adds to the cost of doing business. Environmental regulation is stuck-in-place.

Story Doesn’t End 

If there is one thing President Obama emphasizes over and over, it’s the thread that binds the environment, innovation and economic growth together in shaping America’s future.  The American economy shot ahead of all others in the 20th century and first decade of this century because it innovated. It innovated industrial production techniques, car fabrication and steel manufacturing; its innovation in computer and software technology took over Japan’s and drove economic growth in the ’80s and ’90s.

The American economy needs to constantly renew its technological might.  Innovation is crucial.  In the 80s, other countries began to produce cheaper steel and smaller, less expensive cars, but innovations like the PC and MAC and software giants like Microsoft took over the lead and drove the economy to new heights.   The free-market has been good to the US.

However, the experience of A.E.P. shows that the total disdain for  government so prevalent in today’s politics can itself result in a drag on development of new technologies that are too expensive for one company to invest in on its own.

And that’s what’s happening here: the US is handing innovation in the clean energy technology field over to China.  China is so far ahead of the US in putting ‘clean coal’ technology to work that American scientists and corporate engineers are heading there to test out new theories.  Last year, The Atlantic featured a cover story that told why:

In the search for “progress on coal,” like other forms of energy research and development, China is now the Google, the Intel, the General Motors and Ford of their heyday—the place where the doing occurs, and thus the learning by doing as well. “They are doing so much so fast that their learning curve is at an inflection that simply could not be matched in the United States,” David Mohler of Duke Energy told me.“In America, it takes a decade to get a permit for a plant,” a U.S. government official who works in China said. “Here, they build the whole thing in 21 months. To me, it’s all about accelerating our way to the right technologies, which will be much slower without the Chinese.

They can go from concept to deployment in half the time we can, sometimes a third. We have some advanced ideas. They have the capability to deploy it very quickly. That is where the partnership works.”

From another  US scientist quoted in the article:

“You can think of China as a huge laboratory for deploying technology. The energy demand is going like this”—his hand mimicked an airplane taking off—“and they need to build new capacity all the time. They can go from concept to deployment in half the time we can, sometimes a third. We have some advanced ideas. They have the capability to deploy it very quickly. That is where the partnership works.”

China Uses Regulation to Enhance Development,  Not Retard It.

The demise of A.E.P.’s plans is a reverse example of how the government can help or hinder innovation.  The fragile interplay of regulation and private enterprise can work to America’s advantage.  But the polarized all-or-nothing political climate makes it impossible.  As long as one side promotes government as the default solution to society’s problems and the other side believes it to be the source of everything wrong in America, government and industry don’t have the support to collaborate for the long-term health of the country.

 

 


 

 

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Deficit Deal: Whose Country is This!

The collapse of the Boehner-Obama deficit reduction talks essentially confirms the total incapacity of Republicans to compromise in the interests of the country.  There is no rational reason:

1.  Reductions in spending (primarily discretionary spending) far outweigh ‘raising revenue’ in Obama’s $4 trillion plan.

2.  The tax breaks for oil and gas, private jets and hedge fund managers are inexcusable in this economy.  Due to a huge loophole in the tax code hedge fund managers making billions of dollars a year pay no personal income tax.  This is a clear oligarchical haven.

3.  Obama is willing to tackle the ‘sacred cows’ of Medicare and Social Security.

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To make this into an ideological split between Keynesian and supply-siders, taxes vs. spending, big government vs. small, when the entire fiscal system and credit worthiness of the American economic system is on the brink, is treasonous.  If these people aren’t able to grasp the situation, they have no right to govern.

If Republicans can’t see the difference between what’s necessary for economic growth long-term and what’s necessary on an emergency basis now, they have no right to govern.

And if the Republican leadership can’t whip their base into line, then they have no right to govern.

Obama needs to be clear with the American people:  if we cut spending too much now, the economy will collapse.  If we don’t close loopholes in tax rates and repeal Bush tax breaks for wealthy people, a deficit reduction program won’t be enough to make a dent, and Republicans know that.  It’s  not a  matter of ideology, the figures don’t add up.

The surest means to raising revenue is economic growth.  A collapsed economy doesn’t grow.  Once the economy picks up and the deficit ratio drops, we can get back to retiring debt.

Republicans do not have a right to win seats to Congress and think they represent ‘the people’ more than an elected President, for goodness sake!  They don’t have the right to represent their districts in a national assembly and refuse to compromise.  Compromise is what gives American democracy the flexibility to have lasted 200-plus years.

New York Times

National Journal

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