Business Irish

Friday 15 December 2017

US borrowing nightmare a wake-up call for us all

Thomas Molloy

Thomas Molloy

I happened to be working as a young reporter in Washington back in 1995 when Newt Gingrich and his Republican colleagues closed down the federal government under President Bill Clinton's watch. Some 16 years later, the Republicans are using remarkably similar tactics against the latest Democrat president. The Republicans have never been good losers.

Back in 1995 there was a predictable hullabaloo about the idea that the US government was unable to agree a budget. Just like today, the gloomier pundits and investors made repeated predictions of economic armageddon and mused aloud about the 'Decline of the West', just as Oswald Spengler has been doing since 1918.

In retrospect, the event was significant only because it finally brought Americans to their senses and helped Clinton run budget surpluses rather than the deficits favoured by the George Bush presidencies. It had beneficial long-term consequences and the short-term consequences weren't much of a problem either.

The partial closure of the federal government caused no more problems for people living in the US than our own public sector's childish decision not to answer phones and perform other basic tasks; in both cases citizens got on with their lives and wondered whether there was a way of getting rid of civil servants permanently.

It is for this reason that I am optimistic about what is happening in Washington at the moment. This is not a failure of democracy but a triumph. The failure has been the inability of western governments to control spending or borrowing over three decades to appease voters with benefits that simply cannot be sustained.

That the people who run the United States are finally facing up to the fact that borrowing and printing money are not solutions to their economic problems should be a source of joy.

Some countries, such as Britain and Germany, have also accepted this simple truth and have begun the laborious task of reform.

Here in Ireland, most politicians appear content to borrow indefinitely but our slavish devotion to US fads and fashions means that there are good reasons to believe that one day even the Dail will institute real debates about the national debt rather than just nodding through more and more borrowing in hope of a future default.

To Europeans not versed in the strange ways of American politics, it can seem a little alarming that a largish contingent of the Republican party is blind to the necessity of raising taxes, but without the tyranny of party whips, there are always shifting alliances of Democrats and Republicans in Congress who can come to agreement after marathon negotiations. This will happen in this dispute as well.

As we went to press last night, it seemed that some sort of agreement along these lines was imminent. Perhaps a deal will be forged before tomorrow's deadline but perhaps it won't.

In truth, it doesn't matter too much. The main thing is that the complacency about borrowing now appears to be cracking in the world's most indebted nation, thanks in part to the lunatic Tea Party.

"There is a crack in everything, that's how the light gets in," as Leonard Cohen likes to sing.

Maeve Dineen is on leave

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business