US debt crisis a hard test for bipartisanship
Vu Thu Ha
As the August 2 deadline to lift the US debt ceiling approaches, President Barack Obama's "Yes, we can" election mantra three years ago rings increasingly hollow.
Obama is still struggling to find a clear way out of the crisis, marred by a typical partisan fight in the US Congress, where lawmakers are said to be more interested in playing political games than seeking practical solutions to the nation's debt woes.
With less than two weeks to go, if no political deal is reached to tackle the nation's mountain of debt, which now stands at US$14.3 trillion, the American government would be in default, plunging the country and indeed the world's major economies into renewed turmoil.
Analysts say the current problems facing the world's largest economy are more political than economic. Congress raised the debt limit seven times during George W Bush's administration with barely a grumble. But with the 2012 presidential and congressional elections foremost in everyone's mind, the Republican-dominated House of Representative is seeking to block Obama's agenda, painting him as a big-spender who can't balance the books and who would drive the country to economic ruin if re-elected.
Conservative elements in the Republican Party insist on a huge cut in government spending to reduce future budget shortfalls as a condition for raising the debt ceiling, while excluding the possibility of raising taxes [which would harm wealthy Americans]. President Obama has agreed to "compromise" by seeking major cuts in public spending – which could derail popular Democrat-backed social welfare programmes such as Social Security and Medicare – while sticking to calls to close tax loopholes.
On Tuesday, the House passed the GOP's so-called "cut, cap and balance" plan that insists the administration cut the deficit, cap federal spending and amend the Constitution to force the federal government not to spend more than it takes each year, in exchange for an agreement to raise the debt ceiling.
The plan is going nowhere as it would certainly fail to survive a vote in the Democrat-controlled Senate, and would, in any case, be vetoed by the president if it did. But analysts say it is important for the Republicans to send the message that they had offered a resolution to the issue and that it was the president, not they, who was at fault. It also gives political cover to Republican lawmakers – especially those elected in the mid-term elections last year on pledges to shrink government spending and cut taxes.
But the Republicans' tactics are unlikely to prove productive, and could backfire.
Recent developments seem to put the president in a better position. He now has a more promising plan to put on the table – the so-called "Gang of Six" proposal that unexpectedly emerged on Tuesday and quickly cast a shadow over the Republicans' "cut, cap, and balance" plan. The bipartisan group of six senators, modelled on recommendations last year from Obama's deficit-reduction commission, outlined a plan that strikes a middle ground between spending cuts and revenue increases, including eliminating some tax breaks while decreasing tax rates overall. All measures are aimed at cutting the budget deficit by about $3.7 trillion over the next decade.
The media suggested the plan was a "balanced approach", but were unsure if it could bridge bipartisan rifts.
Obama quickly embraced the plan. That said, he took steps on Wednesday to tackle concerns that the plan lacked detail and that there may not be enough time to put it into legislation before the August 2 deadline by softening his stance on a short-term deal to avert a disastrous default that would buy time to finalise a larger deal.
Obama has at least shown willingness to compromise, which puts the ball firmly back in the Republicans' court. If they fail to co-operate, Obama and the Democrats will have good reason to blame the opposition for any possible disaster. After all, Obama and his administration inherited the financial crisis and the huge national deficit from Bush's administration.
Although recent polls suggest neither side would escape blame if an economic breakdown happened, figures suggest things are getting worse for the Republicans.
A new CBS poll reported that 71 per cent of Americans disagreed with how congressional Republicans had handled the crisis, while 48 per cent disagreed with Obama.
Another poll by Washington Post – ABC News showed that 79 per cent of American independent voters thought the Republicans unwilling to make a deal, while 62 per cent said the same of Obama.
There is also growing dissatisfaction among Republicans with the hard-line stance of their congressional representatives – 58 per cent said their leaders were not doing enough to strike a deal, up from 42 per cent in March.
Republicans may also be losing the war of perception with the majority of the public viewing the president as more committed to protecting the interests of the middle class and small businesses, while seeing the Republicans as protecting the rich at the expense of the majority of the population.
This clearly is not time to make political capital out of the country's good name. If the US were to default on its debt, US politicians, whatever their political affiliations, would have to adopt a new campaign slogan – "No, we can't". — VNS