A warning by your central bank chief that a decision deferred for three more weeks would have "catastrophic" implications for your "financial system, fiscal policy and economy" ought to sound a national alert. And yet Republican leaders in the United States are flirting with catastrophe by their refusal to deal seriously with the Obama administration over the country's debt ceiling. It represents a complete abdication of leadership.
The debt ceiling is the legal limit of the debt the U.S. can issue to meet its obligations. Thanks to expensive wars, tax cuts and the recession, the nation is much obligated: Congress passed nine separate bills to raise the debt ceiling in the past decade. If Congress does not pass another increase by Aug, 2, the U.S. would have to pick and choose which of its current obligations - pay to civil servants and soldiers; cheques for grant recipients; interest on existing debt - it will not meet. In time, the country could be in a default situation, wreaking havoc on a world economy that depends on the U.S. currency.
After years of profligacy, both parties now realize the fiscal trend - debt as a proportion of GDP could double in ten years, says the Congressional Budget Office - is unsustainable, and that a debt-reduction plan, not another band-aid, is necessary. But only one is reaching across the aisle. Mr. Obama's proposal for up to $4-trillion in savings constitutes a massive concession, given the orientation of his base, the Democratic Party.
In the U.S. system, Congress holds the purse, not the President. The Republican majority should share an interest in governing, in such hard choices. But Republican House Speaker John Boehner has capitulated - to his party's presidential candidates and his own deputy, who insist that the deal include no tax changes whatsoever.
Low taxation is a laudable objective. But so is fiscal rectitude. And low taxation at the price of default is a price not worth paying. The complete set of tax cuts approved under George W. Bush are proving to be unaffordable in the long run, yet the Republicans refuse to discuss them. The U.S. tax code, which allows well-connected parties to reduce their obligations, could use reform - yet the extremists in the Republican Party refuse to consider that, either.
Both belief in the U.S. and the country's economic future are at risk if they continue this game. Default is staring Americans in the face. It would be criminal if a broken political culture and an out-of-touch political party inflicted default, and its horrible consequences, on its own people and the world.
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