From Niv Elis at the Jerusalem Post: Though global markets heaved a sigh of relief when the U.S. Congress averted economic calamity by raising the debt ceiling, the saga has left global businesses uneasy about continued political brinksmanship further down the line.
The deal … set up the possibility of another showdown in early 2014. … “Congress’s decision to raise the debt ceiling and approve a temporary budget for the government was taken at the last minute, as expected, and did not solve the U.S. fiscal problem, as expected,” said Uri Greenfeld, the lead researcher at Psagot Investments.
The cloud of uncertainty did not disappear, but is simply sailing toward February, he said.
Already, the effects of the shutdown can be felt in the U.S. economy, which due to its size has repercussions for Israel and other world economies. …
One glimmer of hope is that the political backlash against the shutdown will push politicians toward a deal. According to the Pew Research Center, even Republicans have lost patience with the tea party, whose representation in the House drove the shutdown. …
Speaking before the House passed the bill that averted the debt ceiling breach, U.S. Congressman Chaka Fattah (D-Pennsylvania) said that during his visit to Israel earlier in the week, the leaders he met with “had difficulty understanding” the American political deadlock.
“We can conduct the affairs of government in a way that gains us respect around the world rather than befuddlement,” he said.
It’s no way to run a country
From The Australian: In the end, Barack Obama's widely criticised strategy of refusing to negotiate over the U.S. debt crisis — much less to make concessions over Obamacare — paid off and the Republicans blinked.
But the U.S. President would be unwise to see the deal reached in congress … as anything but a temporary fix. While it ended the gridlock and bought valuable time, it will be a Pyrrhic victory unless Mr. Obama gets to grips with the fundamental dynamics of spending, deficits and political dysfunction. …
Another debt default crisis in three or four months … would be disastrous for the U.S. and global economies. It is imperative Mr. Obama and congressional leaders use the time they have gained to work to end the cycle of fiscal crises that have damaged America’s standing.
The tactics of Republican hardliners, coalesced around the Tea Party, were ill-conceived. Going to war over Obamacare … was never going to work. It is no surprise that widely admired Republican luminaries such as senator John McCain declared Tea Party tactics to be “shameful.” Yet the radicals had a point, and still have a point: the U.S. is living way beyond its means, with its Treasury spending an estimated $US2.5 billion ($2.6bn) a day more than its takes in, and the country is storing up massive liabilities, with no way of meeting them. The urgent need for a reduction in government spending that has piled up $US16.7 trillion in debt is overwhelming. Yet the divisions in congress are such that there is not even the vaguest basis of agreement on how to tackle the issue.
Republicans have suffered a significant setback. Led by Speaker John Boehner, their voter support has plunged to levels never previously recorded by Gallup. This is remarkable, given Obamacare remains widely unpopular among voters and there is universal agreement that the rollout of health insurance since Oct. 1 has been a disaster. The last thing Mr. Obama should do now is gloat or show triumphalism. Republicans are in disarray, but if he is to avoid yet another crisis … he will need their help to end the ongoing “political brinkmanship” the Fitch ratings agency sees at the heart of America’s fiscal and political woes. …
Critics call for ‘de-Americanized’ world
From Michael Pizzi at Al Jazeera: … The world … remains on edge about the burgeoning brinkmanship in Congress, which some fear has become the new normal.
Martin Hennecke, chief economist at The Henley Group, noted that the shutdown crisis may make some central banks, such as China’s, more “nervous” about holding U.S. Treasury bonds and spur them to move faster into assets denominated in other currencies.
According to a widely-read editorial for China’s Xinhua published earlier this week, however, the world’s second largest economy could also have reason to gloat.
Liu Chang, who penned the column, calls for a “de-Americanized world,” riding the wave of anti-American sentiment augmented by the shutdown fiasco.
“The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising [the] debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized,” Liu writes. …
In his column for Asia Times, Pepe Escobar responds to the Xinhua column and suggests that the shutdown could be “the straw that broke the dragon’s back.”
“The old order has died, and the new one is one step closer to being born,” Escobar writes, commenting that the U.S. dollar is already being replaced by a “basket of currencies” in a move pushed by the BRIC nations — Brazil, Russia, India and China — emerging economies led by China.
Russia Today published an interview with British economist Neil Mackinnon in which Mackinnon supports the notion that the shutdown threatens confidence in the American dollar.
“I think these periodic crises undermine confidence in U.S. economic policy; they undermine confidence in the U.S. dollar as the world’s leading reserve currency. And if this dysfunction continues, then over time international investors will be looking for a reform of the international monetary system and they’ll be challenging the role of the dollar as the leading reserve currency.”
Mackinnon concurs with Asia Times’ Escobar that the U.S. dollar was waning in global significance in part due to congressional dysfunction: “These changes that are taking place could easily be accelerated by the problems we are seeing in America at the moment.” …
U.S. brinkmanship handing reins to China
From Fran O'Sullivan at the New Zealand Herald: … The upshot of the dreadful and absurd situation in the United States is that it will simply add fuel to a major shift in global trade already under way where a new international currency — maybe even the Chinese renminbi (RMB) — is poised, (over time) to supplant the U.S. dollar as the world's sole reserve currency.
… (Y)ou would have to have rocks in your head if you believed the days of knife-edge fiscal brinkmanship in the United States were over. There are just too many politicians with a feral bent to make a long-term accommodation sustainable. …
(T)he problem the U.S. faces is that its failure to display strong political governance also comes at a time when China is rapidly increasing its influence.
It’s no accident that an opinion-editorial by Xinhua’s Liu Chang was posted on Monday slamming the U.S. fiscal failure which the writer says “warrants a de-Americanised world.”
Xinhua is China’s official news agency and when Liu writes its time for the world to consider a new reserve currency to replace the U.S. dollar it is obvious this view is being reflected from the top. …
It may not be at the point where it’s time to say, “Get used to trading in RMB — it’s the way of the future.” China’s own system is not sufficiently developed for that.
But the major trend shift is under way.
U.S. democracy is nearing its limits
From Sebastian Fischer and Marc Pitzke at Der Spiegel: … (N)o one should be happy, because the debacle has exposed just how broken the American political system truly is.
… (T)he political crisis has turned out to be a systemic crisis.
America’s 237-year-old democracy is approaching its limits. Its political architecture was not designed for long-lasting blockades and extortion, the likes of which have been enthusiastically practiced by Tea Party supporters for almost the last four years. The U.S.’s founding fathers proposed a system of checks and balances, not checks and boycotts.
In hardly any other western democracy are the minority’s parliamentary rights as strongly pronounced as they are in the U.S., where a single senator can delay legislation, deny realities, and leverage the system. …
Scarcely 50 right-wing populists, led by Tea Party Senator Ted Cruz, have been pushing their once proud Republican party into a kamikaze course. Why are the other Republicans letting them do this? They are afraid of radical challengers within their own party in their local districts. …
The once civil political discourse in Washington has long since turned into a fight of bitter rivals trying to inflict the worst possible wounds. …
America stays on top — but for how much longer?
From James Ashton at the London Evening Standard: … President Obama has won breathing space, but not much. Government is reopened for three months, and the budget needs to be renegotiated within two months. What price a repeat in the New Year, when the new debt ceiling deadline hoves into view on February 7?
Political relief today is matched by corporate dismay. Ongoing uncertainty … could push a recovering U.S. economy back into recession and drag the rest of the world with it. …
America, although its jobless line is too long and crumbling highways need repairing, has bounced back in a way that Britain is only now starting to emulate. …
What is more interesting is what this episode means for the dollar’s status as the global reserve currency, on which the world’s financial system runs. … China is already taking steps to liberalise the renminbi as an alternative to the dollar. …
When the global recovery is still so fragile, America needs to show renewed leadership. In the longer term, the plates of the world economy are shifting. Such indecision in Washington only serves to emphasise the move from West to East.
Democrats win the shutdown battle, but face wider war
From David Smith at the Sydney Morning Herald: … There is no doubt who won the public relations war this time around. Despite widespread antipathy to Obamacare, the overwhelming majority of Americans disapproved of Republicans' tactics. Last week, approval of the Republican Party dropped to record low numbers. The popularity of the Tea Party, and of the congressmen who identify with it, has never been lower. They brought the nation to the brink of catastrophe and have nothing to show for it.
But this win looks less impressive when we consider what now passes for normal in American politics. The deals to raise the debt ceiling and keep the government open expire in a few months. It seems doubtful there can ever be a longer-term deal reached as long as Obama is President and Republicans control the House. …
The weekend Tea Party protest, in which a Confederate flag was brandished and a speaker told Obama to "put the Koran down," may have looked like a lunatic fringe, but it was quite representative of the activists who vote. …
America’s skewed democracy lurches on toward next crisis
From Gary Younge at the Guardian: … From the moment Ted Cruz got up and started quoting Ashton Kutcher and talking about Star Wars into the wee hours, this entire process has been nothing but bizarre. America, once again, took the familiar road from the height of dysfunction to the brink of default – until reality grabbed it by the scruff of the neck and slapped it straight, before it did itself and others grave harm.
Because America is powerful, the world has to take notice of these self-inflicted crises. But because it has become so predictably dysfunctional and routinely reckless, they are difficult to take seriously or, at times, even fathom. To the rest of the world and much of America, this is yet another dangerous folly. The fact that the nation did not default should come as cold comfort. The fact that we are even talking about it defaulting is a problem.
This particular flirtation with fate was driven by a visceral opposition to the moderate provision of something most western nations take for granted: healthcare. The reforms they opposed had been been passed by the very body of which they are a member and had been been approved by the U.S. Supreme Court, the guardian of the very constitution they claimed to be defending. For this, they started a fight they never had the numbers to win and carried on waging it long after it was clear they had lost. …
U.S., Canadian political systems both dysfunctional
From Andrew Coyne at the National Post: … (T)he U.S. system depends upon a measure of bipartisanship. And by and large over the years it has had it. Without the threat of confidence votes to keep their members in line, both main parties emerged as big tents, coalitions of different factions. Crucially, there was some overlap at the moderate edges: with skill and effort, a president could assemble a majority in support of his legislation at least some of the time. The problem today is that there is no such overlap.
But if their system is vulnerable to breakdown, so is ours, in its own way. If in the U.S. the executive and the legislative branches are deadlocked, in Canada the executive has almost wholly consumed the legislature: the prime minister is “responsible” to Parliament only in the most formalistic sense. What we are left with, as the political scientist Peter Russell has put it, is a presidential system, without the Congress. (The Americans, perhaps, have a parliamentary system without a prime minister.)
Two systems, both dysfunctional, in opposing ways. Is there nevertheless a common thread between the two? I think there is. Both have become hostage to small groups of voters, the objects of vastly disproportionate amounts of the parties’ time and attention. In both, the parties are sharply divided on regional lines. And in both, politics has become increasingly, corrosively nasty. …
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