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Chris Ford: US Government shut down: will the US Congress experience a Syria moment?

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Chris Ford
Chris Ford

It's tempting to compare the two most serious crises that the US Government has faced this year, one which could have generated a Middle East wide war and the other (still possible) a global economic cataclysm that could rival or even exceed that generated by the Global Financial Crisis of 2008.

In the Syria crisis, President Obama and the US Congress weighed up the question of whether or not to strike Syria in response to the use of chemical weapons in that country’s two year long civil war. It seemed as if the most serious global crisis for many years could have been generated if Obama struck at the country given that any war could have brought in Iran and Israel and further complicated matters inside Syria itself.

Given these factors, US and global public opinion pulled Obama back from the abyss. Consequently, UN chemical weapons inspectors are now on the ground in Syria following the face saving deal concluded between the US and Russia. Also Iran and the US are now taking the first tentative steps towards improving relations for the first time since the Islamic Revolution of 1979.

I’m just wondering whether Washington policy makers could now see how the Syrian impasse was resolved as an example of how to progress things on the stalemated budget negotiations.

It’s clear that the Republican House majority (spurred on by the Tea Party Congressional delegation) has brought the US Government to a shuddering halt in order to prove their right wing, libertarian credentials. For all Obama’s faults, his popular health care reforms have been a progressive triumph of sorts. However, the Republicans want to see the repeal of this legislation in return for re-opening government.

The fact that the Republicans have ground the US Government to a grinding halt in their efforts to do so has seen them nosedive in popularity. According to one opinion poll I’ve seen, vast numbers of Americans blame the Republicans more than the Democrats or even both parties for inducing the shutdown.

But worse is still to come if no agreement is reached by this time next week.

This is due to the fact that next Thursday, as many people are now being informed via media, the US Government will run out of money to pay its bills. That’s unless the US Congress enacts the lifting of the nearly $16 trillion debt ceiling.

With the Republicans currently in no compromise mode, the possibility of default is growing by the day. If a default takes place, it will produce something close to financial Armageddon with global credit markets virtually freezing and interest rates rising. Also many government workers (now at home twiddling their thumbs while waiting for the shutdown to end) may end up being fired and not paid at all alongside government contractors. These factors will all virtually induce a huge economic recession (even depression) in America which will eventually reverberate globally.

And that’s why many economists and even free market loving organisations like the IMF are saying that the US Congress shouldn’t toy with default and should simply lift the debt ceiling for another year.

I predict that (hopefully) common sense will prevail, particularly among the Republicans, before next Thursday. Sensing the public mood turning against them and with time ticking down towards imminent economic disaster, moderate Republicans might divide with their Tea Party colleagues and unite with Democrats to vote (at least) for the debt ceiling to be lifted. Then they might turn their attention to re-opening government.

Indeed, as history has shown, when crises reach their peak, wiser heads often prevail. As Obama showed in the recent Syrian crisis, he climbed down at almost the last minute given the weight of public opinion against him and also when he recognised the possible horrific outcomes of launching air strikes. Similarly, I believe the Republican leadership, feeling the weight of public opinion shifting against them in the government shutdown and debt ceiling crisis, will back down before next Thursday and negotiate with Obama and the Democrat leadership over, at least, raising the debt ceiling.

Otherwise, we could be looking at, as one economist described it, the financial equivalent of a nuclear bomb going off this time next week. And like real nuclear weapons, having the financial equivalent of one go off is a scary enough thought! It’s now up to the Republicans to relent on their right wing kamikaze mission and save the world (or at least the US) from disaster!

 

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