US On The Brink

Whispering in the Wind – October 21, 2013 – WITW: 1

Over the past few weeks political events in both the United States and Canada have caused concern amongst a good number of observers.  Just days ago the United States was on a precipice of disaster with the government shutdown and the nation close to financial default of its obligations.  The crisis was temporally averted but will return with a vengeance in early 2014 unless something dramatic happens in US politics.  In Canada the RCMP continues to investigate possible fraudulent dealings of some prominent Senators and the role the Prime Minister’s office might have played in the debacle.  To avoid attention Prime Minister Harper is seemingly ignoring the issue and is definitely trying to avoid discussing the matter.  But let me offer my views on the United States as many people are wiping their brow saying that only through political brinkmanship was chaos avoided. 

On the Brink of Political Disaster?

The United States is drowning in debt, a debt that is currently estimated at over $16 trillion.  In the years 2000 to 2007 the national debt in the United States grew by 50 percent, from 6 to 9 trillion dollars.  In 2008 the debt grew to over $10 trillion (due in large part to a $700 billion bailout of the banks and other financial institutions). No matter how you look at it the US is in deep trouble and creditors are expressing some concern – observers in China are suggesting that it is time to de-Americanize the global financial system.  To deal with the crisis some American politicians and financial experts are saying that there are only two ways to deal with the debt crisis in the United States; one is to cut spending – unlikely, in large part due to President Obama’s stance on ObamaCare.  The second option offered is for the US to print more dollars and that means raising the so called debt ceiling.  It is obvious that pumping more dollars into a broken system will have a major impact on interest rates and inflation.  Also expanding the money supply will, under current conditions, threaten economic recovery, growth and stability.  Neither of these two options appears feasible largely because of a stubborn president and a divided, dysfunctional Congress.  The political system is in gridlock and the leadership cannot agree on the role of government in times of crisis.  In the last few days President Obama has voiced his willingness to work with “anyone” who wants to address his country’s problems – a number of observers have opined that it is a first step if the invitation is more that political speak.

 

Nation Building Strategy in the United States

Avoiding an Armageddon situation in the US is not going to be an easy task, it is going to be a monumental task and time is short.  The first step will fall upon President Obama who needs to get the weakened Republican Party (leadership) and the confused Democratic Party (leadership) working together, with a common purpose: build and implement a Nation Building Strategy.  And the Nation Building agenda must include building blocks like:  addressing the ill-effects of globalization on the US ; re-writing the taxation codes; stop (and possibly repatriate) the many billions of dollars that have left the country for safer havens; and introduce policies and regulations that support a re-building of basic industries in the United States.

The “X” Factors

Like all grand political strategies there are unknowns and risks.  One of the biggest unknowns for President Obama is going to be the reaction and the response from the small business community and from the major corporate giants?  President Obama has to gain the active support from the captains of corporate America if he intends to re-build America.  To a significant degree the standard of living in the United States cannot be sustained if it is based on borrowed money – so the captains of industry should be interested if not supportive of a re-built America.  On the political side the biggest unknown is the Tea Party movement, a movement that is growing fast and is particularly strong and prevalent in the southern US?  Here the unknown is how to harness the good ideas coming from the Tea Party leadership and separate those good ideas from the unacceptable extremist rhetoric.  Representative Ted Cruz (the Calgary born Republican representing the Lone Star State of Texas) has emerged as a leader of about 50 members of Congress with Tea Party sympathies.  They, as a block, represent the extreme right wing perspective in the Republican Party.  Mr. Cruz and his gang make some important points that cannot and should not be discounted based on their extremist association and support.  A third unknown factor is the response from the international community, specifically China.  As already mentioned there are muses about de-Americanizing the international financial system but China’s leadership knows full well it’s too early to make a play on world dominance.  Equally the European Union is encountering its own financial problems attached to the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) so President Obama will be given some time to sort things out internally and begin the process of re-building the United States which in itself will help to stabilize the world.