This article was co-authored by Robbie Vaughan and Leonidas Achilleos.
October 17th was as unassuming as any other day in 2013. Schools around the UK shut down for a national teachers strike, Boris Johnson took a helicopter ride over Hong Kong and Snoop Dogg changed his name to ‘Snoopzilla’ for his upcoming album ‘7 Days of Funk’. The weather was nipping breeze to be sure at 19° (a tad above the historical average for mid-October), but unremarkable all the same. Indeed, it was few who felt the precarious undercurrents emitting from the USA, few who could have guessed that October 17th almost marked the day that a supreme global super-power found themselves in dire-straights, bankrupt, and capable of triggering a financial apocalypse around the world. Unbeknown to most, October 17th marked the day when the U.S. exhausted its borrowing capability and hit its debt ceiling, leaving the government with not enough money to honour their bills.
But a government being in debt is commonplace right? So common that almost every nation around the world has debt to some degree. If the U.S. wants a bright future, it needs finance for that future and believes that the future will sustain the present. Debt after all is incredibly cheap for the United States. At the height of this crisis the U.S. only had to pay 2.74 per cent on its debts. Before Greece collapsed, the tides of the market turned and they faced the reality of a 20 percent interest rate on their debts. The devil is in the detail. If a country has to find 20 percent of its debt a year to just pay off the interest, the creditors will soon be picking the bones from the rubble.
It is a reality of the world that the health of the U.S. economy is fundamental to the global economy at large. If the world economy could be likened to the Burj Khalifa then the U.S. is the iron struts which holds the mega structure in the air. Throughout this debt crisis, our global economy has always been confident that America will stay strong. The markets need this external reassurance to drive international finance and trade. America was never going to default on its debt because the banks, the traders, that ‘middle strata’ of faceless bureaucrats and administrative personnel who track and control Americas economy, were never going to exploit their financial flexibility and push the US economy to the brink of destruction.
So what was the Debt Ceiling debacle of October 17th, and how can we describe such a strange and sudden economic hiccup? Was it indicative of Obama’s fall from grace? From the ‘Hope’ campaign of 2008 and a true belief that the world would witness true change, to a fundamental stalemate between Obama and the Republicans. Indeed, it seems that the crises can be described in just such a way. With the governmental conflict between Republicans and Democrats having reached an all-time low, it seems that vantage optimism from the Democrats resulted in a dangerous game of political chicken with the aim of slandering the Republican name. Brinkmanship became the political landscape of the United States amidst the Cold War; Eisenhower fathered it and Kennedy utilised it in fearless fashion during the Cuban Missile Crisis. But perversely, brinkmanship has evolved into a battle between the two political parties of the United States; it is the Republicans pushing this debt crisis to the very limits of its capabilities. The American economy has become uncompetitive in production and rests on the Chinese wave of manufacturing to stay afloat. Its current policy of increasing national debt and the ceiling placed upon it is not a practical policy. It is financial suicide.
The Democrats wilfully allowed the shutdown to occur in a shameless attempt to pin blame on the Republicans for poor economic management. Obama, made coy by the Appropriations Bill (or more appropriately ‘Supply Bill’) has found himself hogtied and unable to effectively govern. The Republicans have voted in favour of all Bills when it has counted, but they have been asking for concessions that will belittle the very foundations of Obama’s presidency. The lack of actual clear communication between politicians and their public concerning the realities of fiscal finance is why these stalemates are occurring. It is causing American politics to become confused and regressive.
The grim reality we face today is a ‘puppet’ Obama. The bilateral split between the Democrat and the Republican senators has compromised Obama’s ability to govern and has turned his administration into relative flux where policies are compromised and undercut by the changing political tides. His flagship presidential policy ‘Obamacare’ faces constant resistance, and come January the Republicans will fight tooth and nail to ensure its utter extirpation. The ‘land of the free’ has become the land of impasse, with a gridlocked President leading a nation without direction. To this extent the situation is currently unparalleled in history. The economics of America are veiled behind uncertainty and the cogs of governmental procedure are marked by belligerent deliberation. Whilst the United States has stayed afloat this time, we have seen the cracks underlying its financial policy being exacerbated by intergovernmental quarrel. As time proceeds the apocalyptic shadow looms ever closer, silhouetting an economy once great. For nothing remains immortal where men stand contentious and cagey, and the U.S. is no exception.