U.S. Debt-Ceiling Crisis Is A Crisis In Economics
By Hema Senanayake -October 11, 2013 |
Hema Senanayake
The legal and political issues of the U.S. debt-ceiling crisis would be resolved sooner – And as a result the shutdown of the U.S. government will end sooner. But the economic issue behind this crisis will continue, being unresolved.
In order to understand the economic issue behind the debt-ceiling crisis, let us put it as debt-to-GDP ratio. Any increase of the debt-ceiling means that, this ratio would go up. What is the optimal debt-to-GDP ratio for any economy, developed or developing? Do the economists have any credible answer? No. Does the IMF have any official answer? No. The absence of coherent answer to this important question indicates a crisis of the existing world-view of economics.
As at now, according to some estimates, the debt-to-GDP ratio of the U.S. is around 105%. The current debt limit is $16.7 trillion. The U.S. treasury demands that this limit has to be increased on or before October 17, 2013 to prevent defaults. After debt-ceiling is increased the treasury will borrow more and the debt-to-GDP ratio will rise again. In 2008 the same ratio was 64.8%.
By seeing this trend of increasing debt, majority Republicans who dominate the U.S. Congress demand that there should be spending cuts in the government. If we ignore their obsession to repeal Obama-care Act (The Patient Protection and Affordable Care Act), what they mean is that the debt-to-GDP ratio cannot go up and up. Why? They have no economic answer but have a morale one. Republicans say that increasing debt means that those debts will have to be paid by our children and grand-children. If we can’t pay our debt now, so would be for our children until the economic system crashes in big time. Do we pay for the debt that our fathers borrowed? No. We are just piling more debt on top of what we inherited. That is what we do by increasing debt-ceiling.
Reward Enemy And Lose Friend
By Malinda Seneviratne -October 11, 2013 |
Malinda Seneviratne
There are no permanent friends or enemies in politics. We could be talking about Ronnie De Mel’s athleticism, Karu Jayasuriya’s pragmatism laced or coated with ‘national interest’, the prudence of the Thondamans and Hakeems, the self-interest of the 60 plus UNPers who crossed over or corporates covering bases in parliament and in so-called professional associations. Our concern here, however, is the applicability of the adage to global power politics.
The operative principle is simple enough: if you are not one of the big players, then you side with one of them or play them against each other. It is true that groupings such as the Non-Aligned Movement can swing the occasional vote in one’s favor. And yet, typically, what keeps antipathies under check this side of thinly disguised invasion is and always will depend on the ability and willingness of smaller or weaker states to take cognizance of the global power reality.
In the year 2013, there is one set of belligerent, trigger-happy states, i.e. the various coalitions led by the United States of America that rain death and destruction on entities that are not willing to toe the Washington line. In none of the wars that the USA has launched against innocent peoples has democracy, peace and civilization featured outside of legitimating frill; it has always been about strategic and commercial interests, the extraction of resources, securing of markets and exploitation of people. Things were easy in the 1990s when Russia was still emerging out of post-Soviet debris and China was not yet the economic giant it is now. It is all different now.
