Cooled down in the proverbial 11th hour, at least until it is brought back on the boil next January, the US debt ceiling clash puzzles Europeans and gives them an opportunity to re-asses their own leaders’ shenanigans.
Europeans are used to political debacles resulting from economic crises. It is, after all, what we have been doing in Europe over the past 4 years with embarrassing regularity.
What Europeans find hard to wrap their minds around is the opposite chain of causality: Economic crises resulting from political chicken games of seemingly astonishing childishness.
Europeans understand why a Democrat-held White House may clash with a Republican dominated one. They understand less the fratricidal war within the Republican Party that was a major driver of the debt ceiling show down.
In Peripheral countries like Greece, Portugal, Spain, Ireland, even Italy, countries immersed and drowning in un-payable debt, the race has been on for 4 years now to pretend that these insurmountable debts can be repaid even though we all know they cannot. Imagine the Greeks’ bafflement when they hear that the most powerful economy in the world, which has no trouble repaying its debts, is toying with a default when Greece and Europe have struggled so hard to mislead the world that Greece’s debt will be, somehow, repaid. Using default as a weapon with which to wage internal wars seems to Europeans like a very peculiar form of self-inflicted credibility loss.
Of course it is crucial not to trivialize what is going on in the United States. Once we look a little more closely at the political economy of the Land of the Free, it all begins to make sense. This impasse is not about debt. When America’s debt to GDP ratio went up by 40% to bailout Wall Street, the Republicans did not even squeak. Their current squealing is about those who do not need social security and affordable health care not wanting to share into the costs of those who do need social security and affordable health care.
So, whenever Europeans witness kicking and screaming about the US debt “being too high”, it helps to recall that the cacophony is a mere tactic for stopping tax dollars from being committed to the weak; to those who never benefitted from the bailouts that pushed the debt to its current level of over 100% of GDP.