The crisis in the US Congress has finally come to an end and President Obama was able to raise the country’s debt ceiling without invoking the 14th Amendment. It has been a weekend of worry and apprehension as to how far extremist factions such as the Republican Tea Party were willing to go and whether they were prepared to bring the country to the lowly depths of economic default.
Neither major party had seemed prepared to give up what means most to them; the preservation of continued support for Medicare and Social Security (Democrats) or the need for heavy fiscal cuts in the wake of massive debt (Republicans). Nevertheless, President Obama reassured us on Monday evening that they had come to a proposal that neither party preferred, after seeing the Democrat Reid Bill quashed after quick succession of the Republican Boehner Bill.
All of this commotion and deal wrangling actually offers lessons for Britain’s politicians. The US worked right up to the wire in the hope of staving off an economic crisis, much the same as Britain was fighting in post-election May 2010 when the European Sovereign Debt crises threatened to bring the UK economy into turmoil and the loss of market confidence. US Democrat Senate Majority Leader Harry Reid called the Obama proposal “the essence of compromise, not everyone gets what they want”. What’s more important about his comments is that they were said prior to the deal being signed and sealed.
Instead of educating the British public into what it actually means to form a coalition, many were left in the dark through the preceding Autumn/Spring with only party political media to guide them. This left too many people with false expectations about what was to be negotiated and only lead to an enhanced feeling of betrayal and loss of trust in our political culture. Proof of doing otherwise has been plain to see on America’s C-SPAN as you have had plenty of people speaking out on how compromise is key and evading a crisis was the majority desired focus, even if it came at the detriment of individual party interests.
You might expect me to next claim that American’s are better at reaching the compromises they call and propose for as well, unfortunately, for nearly all our sakes; they were not. Congressional caucuses writhed over the minute detail of economic restructuring and “cut, cap and balance” ratios to the point where both Houses had their votes pushed forwards. They have shown a complete disregard for economic health and safety resulting neither party being satisfied with the outcome and the US public feeling disheartened by their political system.
On the other hand, the UK coalition negotiations saw the Liberal Democrats lead on putting the country first; ahead of party interests and to ensure that we stave off any threat of economic instability or decrease in market credibility as may later be the case for the US credit rating.
Thus this crisis teaches us that US may be better at educating their public in the necessary action to be taken, but Britain, and Liberal Democrats more so, are better suited and more responsible in working sensibly and timely in the nation’s interests. Credit rating agencies such as Moody’s have given the US a reprieve, for now, but who knows the final sentence to be laid on the whole of America for their politicians’ procrastination. The coalition however, continues to enjoy IMF confidence and OECD applause and that’s primarily down to the Liberal Democrats putting people first!
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14 Comments
It is all well and good praising the Americans for reaching a compromise. But all the have done is agreed that hey can get themselves into more debt. By raising the debt ceiling all they are doing is offsetting it till another day. At some point it will come crashing down
I do think people in Britain seemed not to understand that compromise is an inevitable part of a Coalition.
Americans in politics are used to some fairly brutal consequences of their two Party system, with staff changes when any administration changes. They are also used to some compromises when things get difficult and old-fashioned politicians on either side used to be ready for that.
This year, the influence of the tea Party people thew a spanner in the works
Mercifully the votes have passed, but I don’t think this is over. The price may be high and, despite the votes, I fear the argument will continue.
Anybody’s guess at how the voters react to an unusual lack of compromise!
The problem in the US is that the 2 political parties have mutually incompatible visions of society. If I lived in the US I would be lived at this deal which looks like it is going to make life considerably worse for those on low incomes.
As for the credit ratings agencies, they have their eye on us just as much as the US. Despite having followed their advice growth in the UK is very low and not at the rate needed to help us pay off our sovereign debt.
We have nothing to learn from America. They are, IMO, in terminal decline. I was born in the States but have spent the majority of my life in the UK. Their politics is so skewered towards the right that American conservatives genuinely think our conservatives are left-wingers. I would not be surprised if America does not exist in its current form in 50 years.
They have everything to learn from us.
I don’t consider the plan reached in the US to be the saviour plan, how can it possibly be with a Select Committee being forced to make harsh cuts in the fear of automatic fiscal cuts to Medicare and Defence. That said, the current situation is much better than having seen the US default.
The world economy is clearly searching for a country to default in order to expose the over-grown debt in our global system, lets hope its a smaller country that is let down in order to show the cracks and not the US with its enormous cavern system of debt – surely big enough to swallow the whole world up.
An interesting point made on the 2 party political system and bicameral differences between US and UK legislators. The question of compromise and coalition may well appear in May 2015, I’m hoping the difficult lessons being learned now by both the public and politicians a like will ensure that expectations and realisms match and the eventual result is better respected by the voters, after all, most coalitions are reflective of the nation’s nervousness in going with a particular party and their clear policy priorities.
I love the rewriting of history on this website.
You campaigned on a slower pace of cuts and protection of public services. All your candidates and your party leader said the Tory plans were economic suicide.
Once in the government you supported the immediate slashing of services and the pace of cuts that the Tories were going to take arguing those who opposed were “deficit deniers” and how immediate cuts were vital.
It wasn’t compromise it was a betrayal of everyone, including me, who voted for you – this is why you are on 9% in the polls and will never get a sniff of power again.
@timak – I think you’ll find the party responded appropriately to the economic situation in the eurozone at the time and considering the markets were opening on the morning of Monday 10th May, it was essential that we continue the faith they had and still have in the UK economy.
Coalition with Labour was no longer applicable and their economic plan of increased investment and accelerated spending was not and still isn’t appropriate. Likewise, a minority tory government would have implemented cuts in a much harsher fashion resulting in an even slower rate of growth or even the return of recession.
It may well come about that this talk of Plan A+ and Vince’s renewed proposals will deliver the type of economic agenda being campaigned for in a Liberal Democrat majority government in 2010. The IMF still support us but they also recognise the need for sustained growth and the Lib Dem economic influence may well provide the inertia required.
Please don’t feel betrayed because you weren’t, you voted for governance that was liberally democratic and within the restrictions of a hung parliament, subsequent coalition and a pressing economic situation – the party is working to deliver just that.
The right-wing Republicans won. Obama didn’t get a single tax rise and all the 2.5 trillion ceiling increase will be paid out of cuts.
When the cuts bite the US will go into recession and probably take most of the developed world with it.
The thing is, western government when they bailed out the banks simply transferred private debt to sovereign debt. Sovereign debt is the last back stop, there is no where else for it to go after then. If countries with massive debts go into recession what then?
Will they be able to pay it back. If not we will just have to change the rules and come up with a new economic system.
Look at the slump in the markets. What the compromises in the US actually teaches us is that the markets respond to confidence and growth. You cannot cut your way out of a recession, because it is an admission that you are not going anywhere positive. It has never worked.. The problem is that if you compromise with people who are wrong you end up both being wrong.
Sooner or later you have to look at raising tax, closing loopholes, regulating the markets and renegotiating the bail out deals with the banks. Free market radical fundamentalist attitudes caused the problem and more of the same will only make things worse. The Lib Dems economic ideas were more or less right in the election campaign . Compromise for the good of the country isn’t working because too many Tory politicians are ideologically wedded to a reading economics that is simply wrong. Unfortunately this includes the Chancellor.
“The current situation is much better than having seen the US default.”
Neither the Republicans nor the Democrats, ruling on their own, would have dreamt of risking default. The Republicans could have made deeper cuts and debt reductions but would have been judged by the electorate on the consequences. The Democrats could have opted for returning to stimulus but would likewise have been judged on whether it worked.
As it is, we have a US policy which probably won’t work, and when it doesn’t work, each side will blame the other. Neither side will be well placed to learn lessons and do things better next time.
So what’s so marvellous about coalition and political stalemate, then?
@Glenn
“Look at the slump in the markets. What the compromises in the US actually teaches us is that the markets respond to confidence and growth.”
That’s part of the problem. We had over a decade of governments all around the world desperately trying to keep up market confidence since loosing it would cause substantial short term pain and potentially loose them an election. This involved boosting demand through government deficits, and turning a blind eye to consumer credit and an unsustainable housing market. This didn’t vanish anyone’s economic problems but instead stored them up until someone blinked and the whole thing came crashing down.
Of course it never finished coming crashing down because governments got together and once again increased their deficits to temporarily ease the pain. All this has done is massively increase the burden on taxpayers and store up yet more problems for when the crash recommences and finally finishes adjusting the markets to the underlying economic realities.
Charles I agree to an extent. But the deficits were largely caused by propping up banks that were doing foolish and in some cases crooked things, As for consumer credit and the unsustainable housing housing market these are not world wide sins. They are largely restricted to Britain an the US! And were arguably the result of a commitment to a form of free market capitalism that other countries tend to shun. What French and Germans call the Anglo Saxon model
The bigger point is that you cannot expect ordinary people to work longer, get less and run countries into the ground just so the banks can continue doing the same thing. We’ve been here before. The world needs Roosevelts not Thatchers, Reagans, Bushs, Browns and Blaires. Cuz IMO this is actually a depression, the sound of 30 years of recieved economic wisdom dying..
@David Allen – its important to note that Britain is in coalition whereby the governing parties have a significant amount of policy agreement whereas the US’s two main party are co-governing with a significant amount on conflicting policy and teeth gritting.
Coalition implemented correctly offers the opportunity for political collaboration and general exclusion of extremist agendas, this is generally in line with the majority of voters and can provide a clear direction of governance and long term policy making. On the other hand, political stalemate and political enforcement of collaborative policy is important in avoiding terminal short-term catastrophe but I’m suspecting the end result is a policy sticking plaster and not proper fiscal treatment.
It might be interesting to explore the different types of ‘compromise politics’ that the US and UK have utilised in recent years and the drivers behind the politicians actions. I’m currently watching the asia/pacific sell off on bloomberg which is saying a global restructuring and price lowering of markets is the result of poor political attempts of staving off the dreaded double-dip. Question remains; are we avoiding the unavoidable and in the process only ensuring a larger crash in the medium term.
“We had over a decade of governments all around the world desperately trying to keep up market confidence since losing it would cause substantial short term pain and potentially loose them an election. This involved boosting demand through government deficits, and turning a blind eye to consumer credit and an unsustainable housing market. This didn’t vanish anyone’s economic problems but instead stored them up until someone blinked and the whole thing came crashing down…. when the crash recommences and finally finishes adjusting the markets to the underlying economic realities.”
Of course it will never stop “storing up problems” for the future until we come to realise the physical realities of living on a finite sized planet with finite resources, particularly oil which has powered, or been a key raw ingredient for, much industrial “development” – I put that in quotes as often it has made life worse for people as the rich get richer at the expense of the health of the poor who choke on the fumes from their cars for example. What we need to do is take a look at our economic model and make it work in a world without growth, as in most developed countries more growth comes at the expense of something we hold dear, or someone else’s life or livelihood somewhere else in the world, or more debts for the future, none of which I want. I really wish someone would give Vince Cable a copy of the book “Prosperity without Growth” fast, so we don’t kill ourselves by destroying our own life support systems in the endless persuit of something which brings us what in the end? There is NO LINK between GDP and increased happiness / fulfillment with life, which surely is what most people strive for?