Obama faces political death over debt

Notwithstanding a looming economic calamity which could even dwarf the 2008 crisis, the United States carries on with its wars. As the US public debt approaches the $ 14.3 trillion legal limit, the Barack Obama administration and the Republican-controlled House of Representatives have locked horns over how to sort out the mess. What is puzzling is that neither party wants to switch off the war machine.

Commenting on the high costs of America’s wars, Michael Sheuer, a former CIA counter-terror expert once said, “Osama (bin Laden) doesn’t have to win; he will just bleed us to death.”

With each passing day, the crisis worsens, yet the administration spends $10 billion a month on its Af-Pak war alone. By August 2, according to the US Treasury, the amount of debt the government can owe is expected to be exhausted. To get over the crisis, the Obama administration wants to shift the goal post by increasing the legal limit to borrow. To overcome a debt crisis, the administration resorts to more borrowing. What an irony! This was what the Lehman Brothers, one of the errant financial institutions which brought about the 2008 economic crisis, did as the housing market was collapsing. The company went bankrupt, but the crisis taught the US administration lessons in economic management.

The George W. Bush administration stepped in with a $ 700 billion rescue package to help the financial market raise its head. But when the government is in crisis, the market forces gang up to bring about a catastrophe, which President Obama rightly termed economic Armageddon.

Unlike the 2008 crisis, which was the product of the greedy Wall Street, the present crisis was caused by the previous Bush administration.

Its imperialist wars and the questionable bailout packages together with financial indiscipline were largely responsible for the mess which President Obama was unfortunate to inherit.

In an argument with Republican lawmakers last year, Obama said: “The fact of the matter is that when we came into office, the deficit was $1.3 trillion — $1.3 trillion. So when you say that suddenly I’ve got a monthly deficit that’s higher than the annual deficit left by Republicans, that’s factually just not true, and you know it’s not true. And what is true is that we came in already with a $1.3 trillion deficit before I had passed any law. What is true is, we came in with $8 trillion worth of debt over the next decade.”

The $8 trillion debt Obama inherited has reached $14.3 trillion. Now he talks of spending cuts and raising revenue through taxes. But the spending cuts do not include cuts in the gargantuan military budget that supports three wars in the Af-Pak region, Iraq and Libya, military operations in Yemen and Somalia and numerous bases, war games and secret missions around the globe.

Professor Paul Sheldon Foote of the University of California says the US’ engagement in “endless wars” and unsustainable social programmes are the main cause of the country’s financial crisis.

“We burn massive amounts of resources invading countries all over the world,” he told Iran’s Press TV adding that immediately ending the wars and bringing US troops home from the battlefields would help to improve the situation.

AFP this week quoted a report published by Rhode Island’s Brown University as saying that wars launched by the US — the wars in Iraq, Afghanistan and counter-terrorism campaigns in Pakistan and Yemen — have cost up to US$ 4.4 trillion since 2001.

The authors of the report argue that governments almost always go to war underestimating the potential duration and costs of a conflict while overestimating ‘the political objectives that can be accomplished by the use of brute force’.

No wonder, in the recession-hit US economy, it has been the war industry firms such as Halliburton, Blackwater, General Electric and DynCorp that have been making multi-billion-dollar profits.

But neither the Obama administration nor the Republicans are interested in stopping the war and saving the trillions though both are agreeable to the proposal to extend the debt ceiling. They only differ with regard to long-term policy changes.

The Obama administration and the Democrats in Congress call for spending cuts and taxes on the rich and the middle class while the Republicans want mainly spending cuts in medicare and social security instead of tax increases. It appears that the Republicans are determined to make Obama a one-term President and one of their weapons is economy. It is not the killing of the al-Qaeda leader in Pakistan that will decide Obama’s re-election. Rather it is his economic performance that will ensure him the second term in office.

Not only the Republicans but the powerful Israeli lobby, which dominates the US financial market, will be glad to see the back of US history’s first black president. The lobby is angry because Obama calls for a Middle East settlement based on the 1967 borders and opposes Israel’s settlement building activities in occupied territories.

It is said when the US sneezes, the rest of the world catches cold. So one could imagine the crisis the world will undergo if the US falls sick. If the Obama administration and the Republicans cannot reach a compromise by August 2, it will mean that the US government will not be able to borrow money or even pay the salaries of government servants. This will also mean the government will not be able to pay its debt obligations, especially with regard to the sovereign bonds that have attracted China, Japan, Middle Eastern countries and almost all major banks. A loan default could trigger a serious global economic crisis, perhaps the worst since the Great Recession.

With rating agencies threatening to downgrade the US creditworthiness, the outlook for the US economy seems to be gloomier than ever. What’s more alarming is that the debt crisis comes at a time when half of Europe is also in major economic turmoil with Greece at near bankruptcy while Ireland, Spain, Portugal and even Italy are struggling to avoid a nose-dive to doom.

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