Republicans go nuclear on Obama
US government shutdown: John Boehner
Photo: EPA |
| http://cir.ca/news/government-fiscal-debate-fall-2013/113591 |
Technically,
the default will not occur until the US cancels one of its payments on
existing bonds, but this nightmare scenario becomes quite probable if
the Treasury can’t issue more debt. For every dollar spent on the
federal budget, the US has to borrow 40 cents. If the debt ceiling is
not raised, Washington will have to choose between two outcomes: default
on its debts and crash the economy or pursue drastic budgetary
reductions and crash the economy anyway.
Bloomberg
reports that “House Republican leaders plan to bring up a measure to
raise the US debt-limit as soon as next weekas part of a new attempt to
force President Barack Obama to negotiate on the budget, according to
three people with knowledge of the strategy. The approach would merge
the disputes over ending the government shutdown and raising the debt
ceiling into one fiscal fight.” While this might sound as a viable
strategy of political arm-twisting, Obama doesn’t show any willingness
to cave in to Republicans’ demands.
Obama
made it crystal clear that he is not going to negotiate in order to end
the government shutdown. He believes that Congress must act to reopen
the government without additional conditions. Republicans don’t see it
this way and there is no visible way for reconciliation.
If
the crisis is not resolved until October 17th, both parties will get a
reminder from Wall Street regarding their duty to keep the economy
afloat. Most likely, such a reminder will be in the form a micro-crash
of the stock market. Investors, both American and international, are
concerned about the debt ceiling debacle and they will become
increasingly worried as the “default day” approaches.
A
government shutdown hurts the economy indirectly and slowly, while the
failure to raise the debt ceiling will quickly lead to serious or even
disastrous consequences. Judging by previous experience, a small market
crash should be enough to force Obama and Republicans to negotiate an
armistice and find a solution at least to the debt ceiling problem. If
such a solution is not found quickly, then the bond market is likely to
crash making the whole political fight absolutely meaningless.
A
bond market crash will create a situation in which the US won’t be able
to finance its budget and won’t be able to borrow more at reasonably
low rates, virtually ensuring a default. This scenario will become
likely, if both parties refuse to understand that they are actively
working to transform a political crisis into an economic catastrophe.
The
President made clear to the Leaders that he is not going to negotiate
over the need for Congress to act to reopen the government, but the
Republicans plan to link the debt ceiling exactly to this kind of
negotiation.
While the country’s most recent elections were generally considered to be free and fair (despite threats against international observers), the current crisis has raised questions in the international community about the regime’s ability to govern this complex nation of 300 million people, not to mention its vast stockpiles of weapons of mass destruction.
Americans themselves are starting to ask difficult questions as well.
As this correspondent’s cab driver put it, while driving down the
poorly maintained roads that lead from the airport, “Do these guys have
any idea what they’re doing to the country?”
NUCLEAR OPTION IN THE MIDDLE OF THE ROAD AND SO IT'S TIME TO GET THE VOTE FROM ALL THE PEOPLE - 300 MILLION GIVE OR TAKE A FEW, AND THE DIGITAL DUST GETS TO PAY FOR ALL US, NO MORE TRICKS FEDERAL RESERVE HOLLOW WEENIES
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