Military Review

How long will the crisis last? Analyst opinion

19

The US public finance system is experiencing one major shock after another: in early March, the sequester came into force, an equally proportional reduction of all articles of the state budget, military and civilian.


By October XNUM Congress was unable to adopt the budget for 1, which resulted in partial closure of public services. And finally, October 2014 America is threatened with a default, which, theoretically, could affect the domestic and global economy just as negatively as the 17-2008 recession. Although there have been signs in Washington in recent days that Democrats and Republicans will come to an agreement and delay bankruptcy for at least several weeks, the question of the ability of America’s political system to respond adequately to economic challenges does not come off the agenda.

Е.А .: Each of the three acts of the budget drama itself is quite logical and explicable, and only their combination, in the opinion of many commentators, turns the battle between the executive branch and the parliament into an absurd staging.

Let's start with the sequestration. Our interviewee, an analyst at the American Enterprise Institute, Stanley Weiger.

SV: In the summer of 2011, America faced the same problem as today, raising the limit of public debt. The Obama administration then agreed with the Republicans in the House of Representatives that they would raise the borrowing limit in exchange for the establishment of a commission authorized to work out a long-term agreement on stabilizing the public finances system; it was about a set of measures to optimize expenditure and tax policies. The agreement between Obama and the Republicans also provided that if the parties do not agree on what specific expenses to cut and which taxes to increase, then the sequester will immediately enter, equal proportional cuts in all budget items regardless of how sensible it is from a state point of view. Negotiators assumed that the prospect of sequestration is so terrible that the members of the specially authorized commission, in order to avoid it, will come to a compromise. However, this did not happen, the political system misfired, but the costs were somewhat reduced.

Е.А .: They are reduced, unfortunately, without any hint of logic, and this irrationality only discredits the political class of Washington, emphasizes Weiger.

The next act of the budget drama was the termination of the work of a part of public services.

SV: A noticeable number of institutions closed nearly two weeks ago because the Democrats and Republicans could not agree on a budget for the 2014 year. Even not so much on the budget - there is no full-fledged budget legislation in the country for several years, but on the so-called resolution on the “automatic budget”, which extends state financing in the amount of the previous period for a period of one and a half to eleven months. On what basis, in the absence of any budget, do not close state services continue to work? - On the fact that many government programs are protected today, they do not depend on the budget situation. These include, for example, health insurance for the poor and the elderly, social pensions, food stamps. Not to mention the service of public debt. They account for up to 60% of all federal spending. The remaining 40% are divided approximately equally between military and civil programs. Republicans in Congress agreed with Obama that the Pentagon will be funded at a level that was established after the sequestration, and therefore the Ministry of Defense continues to function. On leave, therefore, sent only support staff of civil services. Theoretically, this is unpaid leave, but everyone understands that these people will receive their salaries in full, but it’s not known when exactly.

Е.А .: It is exactly the fact that the lion's share of government spending is protected, and allows politicians to stand in the pose of ideological fighters and play in principle at relatively low rates, says an analyst at the American Enterprise Institute.

The third and potentially most catastrophic act of drama, in the shadow of which the first two were played out, is the US sovereign default, which may occur as a result of Congress’s reluctance to raise the national debt ceiling.

SV: Before the US entered World War 1, lawmakers separately approved each new issue of government bonds carried out by the Ministry of Finance. Under wartime conditions, this turned out to be unduly red tape, and the Ministry of Finance was authorized to promptly issue securities, varying at its discretion, their maturity dates and coupon rates. The Congress retained the prerogative to set only the general limit of borrowings made by the Ministry of Finance. In that distant era, there were no protected items in the federal budget at all. But today, as we have said, a huge part of the budget is protected, which means that the deputies of the lawn-nalens should seek funds for it. If the income received by the treasury is not enough, the Congress is obliged either to raise taxes or borrow money. But the law of a hundred years ago gives the legislators the formal right not to raise the borrowing limit, without which all the expenses that these legislators once voluntarily voted for cannot be paid. That this law, however, allows the legislature, regardless of which party dominates at any given time, to try to wrest budget concessions from the White House, if its owner is a representative of a rival camp.

Е.А .: How does the worst-case scenario look like if the national debt ceiling is not raised?

SV: In other words, what happens if the coupon payments on bonds of the American treasury cease? Their price will collapse, and since many business entities are credited to banks just on the security of these bonds, the entire global banking system can combat an attack of asphyxiation. The strangulation of loan operations, in turn, will inevitably hit the stock markets, as the participants will have working capital for the purchase of shares. In addition, the interest rate on US Treasury bonds serves as a point of reference for calculating interest on the mass of other debt instruments, and if this major landmark staggers, operations with the remaining instruments will also stall. These are only the consequences of the first order, but they are also enough to understand that after the American default, the world economic system will be in the same, if not worse, position in which it was at the peak of the last financial crisis.

Е.А .: They say that even if 17 of October or somewhere around this date runs out of the current borrowing limit, the United States does not need to declare default, because current tax revenues will be enough to serve the national debt.

SV: Yes, at this point of view there have recently appeared many adherents who are absolutely sensible, although initially it was only voiced by the most implacable opponents of President Obama. However, the other day, Finance Minister Jack Liu, as if by way of objection, stated that his department does not have either computer software or an appropriate legislative base to rank payments. That is, to declare the repayment of public debt the undisputed priority number one, and other expenses to pay for the degree of their importance, as long as enough money. I don’t know how sophisticated software the Ministry of Finance has, but it’s clear that if a crisis breaks out, the emergence of a law on prioritizing government payments will not take long to wait,

Е.А .: a reporter's interlocutor, an analyst of the American Enterprise Institute Stanley Weiger is sure.

Many in Washington share his opinion that budgetary troubles occur due to the loss of the ability of democrats and republicans to negotiate, to feel the boundaries of the possible, not to tie into one tight knot technical problems such as raising the limit of public debt and essential health insurance system. The negotiation deadlock on the budget in the light of this position is a consequence of a deep-seated phenomenon consisting in the unusually increased influence of the radicals in the ranks of both leading parties. Cases, in the opinion of these analysts, would have been even worse if America had no independent economic institutions capable of somehow extinguishing the excesses of politicians. So, Wall Street, which has an influence on Republicans, is afraid of not raising the government debt limit, and this pushes the right to concessions to Obama on this issue. The Central Bank also seems to be dampening the political negativity, which, contrary to plans, decided not to change the course for monetary expansion, so that budgetary battles do not inadvertently cancel out the process of economic recovery.

At the same time, another large and influential group of analysts does not believe that something out of the ordinary is happening in Washington, indicating a constructive flaw in the political mechanism. In an interview with RS, well-known commentator Michael Baron, in particular, said:

MB: The United States lives under the constitution of a presidential republic, in which, unlike parliamentary, the predominance of one party in the legislature does not mean its dominance in the executive branch and vice versa. The founding fathers of America created a system of checks and balances precisely in anticipation of the conflicts that we are now experiencing, and did not fear them. Rather the opposite: they were worried that the momentary radical majority in their utopian aspirations could impose irreversible destructive changes on the people, and took steps to minimize the likelihood of such a majority in all branches of government at the same time. I do not see anything wrong with the fact that Obama does not want to sacrifice his brand law, health insurance reform, especially after a convincing election victory, or that Republicans from the Tea Party Movement see Obama Medicine as a threat to economic growth and they want to, not violating any laws, torpedo it. Especially since, according to polls, most Americans are very unhappy with it. It is not superfluous to recall that the partial closure of state services took place seventeen times since 1976, mainly when the Democrats had a majority in Congress and did not want to finance either the Reagan initiatives or — and who would believe in it now? - A proposal by his party member, President Jimmy Carter, to pay abortions to poor women from the state budget. Since the end of the last century's 60, America has lived 70% of the time with multi-party branches of government. James Madison and 39 other authors of our constitution did not want to create an active state, their goal was to create a state with limited power.

Е.А .: There are several discussed draft agreements between the White House and the House of Representatives on various aspects of opposition. One of them looks as follows: Republicans delegate to the president the authority to raise the limit of public debt by himself, retaining the opportunity for the legislature to veto this decision by a qualified two-thirds majority. Obama, for his part, is inferior in a number of provisions of the health insurance reform, for example, establishes a more thorough check of the level of income of citizens eligible for subsidized insurance, and postpones the introduction of a target tax on medical equipment manufacturers for two years, the amount of which will go to subsidies to buyers of medical policies .
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  1. Stiletto
    Stiletto 17 October 2013 09: 15 New
    +2
    The article was a little late. The political show in SsyShyA has already been completed, and it will continue indefinitely, until other countries (and ours is no exception) are ready to buy up candy wrappers of the United States, faithfully believing in the ideality of the economy of this country and pouring fresh blood into the insatiable belly of this bloated tick.
    1. a52333
      a52333 17 October 2013 09: 39 New
      +2
      public debt servicing. They account for up to 60% of all federal spending.
      Cool. The Chinese are touching in this regard. Continue to lend. Take some steps. How timidly.
      1. S_mirnov
        S_mirnov 17 October 2013 12: 06 New
        +2
        Wow, the second article about the US crisis in a day, at first Misha the journalist laughed at the USA, now the author is worried about the USA. Probably a very burning topic for those who have a lot of dollars and the ass shrinks from fear laughing
        1. Ascetic
          Ascetic 17 October 2013 15: 15 New
          +1
          Quote: S_mirnov
          who has a lot of dollars and ass shrinks from fear


          The girl tells her friend:
          - I go yesterday, I see a hundred bucks, I think I’m lucky FOUND !!!! I bend over, I feel ... EARNING !!! laughing
    2. Botanologist
      Botanologist 17 October 2013 14: 51 New
      +2
      Quote: Stiletto
      The political show in Sssyhya is already over,


      Suspended for 2 of the month.


      Quote: Stiletto
      as long as other countries (and ours is no exception) are ready to buy candy wrappers of the States


      The problem is that world production is beginning to be comparable to US debt. Now debt service costs 60% treasury, but when it exceeds 80-90%, everything will end instantly. Although the Democrats agree with the Republicans, even if there are no options, they will not. After all, real money should go to the budget, and not an electronic figure. And where to get them? The more debt, the more thrashers, the less free money in the budget. And the more you need to borrow, of course. But you can’t borrow endless amounts - there’s simply nowhere to go. Moreover, China announced a reduction in production capacity by 25% (!). And this means that:
      1. Consumer prices will rise due to lower domestic competition, and the whole world will begin to purchase less in China (in volume). Accordingly, physical turnover in the United States will also be reduced, which will cause the release of working hands.
      2. The big question is China, where to get laid off to reduce workers. He doesn’t need hunger riots. Therefore, China will have to fight somewhere in order to find application to the free population. He has someone to fight with - Japan, the USA, India, the Philippines, Vietnam, and even little things. And the war game will give China a boost, and the United States will bury it because of the need to look for money for expeditionary forces and weapons. And along the way, the war with China will destroy the main US borrowers - the same China and Japan.
      Like it or not, the US default and some sort of mess are looming ahead.
      So we are waiting for default.
  2. patriot2
    patriot2 17 October 2013 09: 37 New
    +2
    The show will continue - the printing press is up and running again ...
    1. alexng
      alexng 17 October 2013 14: 26 New
      +1
      Two planets meet:
      - How are you?
      - So it does not matter. It seems that I somewhere caught the mind.
      - Nonsense. I also once had been ill with this. Four, in the worst case, five millennia - and it goes away. You’ll temperature a little if this infection has time to think of a thermonuclear reaction. And if treated and not started, then already at the stage of antiquity remission usually begins.
      I usually take three asteroids per millennium after each ice age for prevention, and no problems.
    2. Botanologist
      Botanologist 17 October 2013 14: 54 New
      0
      Quote: patriot2
      the printing press is up and running again


      He did not stop. The question is when will banks refuse to serve American papers due to the fact that this business will become unprofitable.
    3. Orik
      Orik 17 October 2013 15: 31 New
      0
      The point of no return has long been passed, they will print, print and print. The show is for domestic consumption, and the scribe will come suddenly and imperceptibly ...
  3. major071
    major071 17 October 2013 10: 02 New
    +6
    It was clear that they would agree. Each side simply showed its ambition. And when they realized that they could fly like plywood over Paris, they all settled right away. Again will live in debt. And again we buy green papers that are not even worth the effort spent on their production.
    1. Algor73
      Algor73 17 October 2013 10: 45 New
      +3
      The fact is that practically the economies of all the less developed countries are tied both to the US dollar and to its economy. The crisis in the US is not beneficial to anyone, not even the Chinese, in the worst case, right now.
      1. teleset
        teleset 17 October 2013 11: 22 New
        +3
        Likewise, if the state is coy, it decides to rebuild its financial system as well, the Americans will put on a pile of shit democracy in this country either by coup or intervention, or an unfortunate incident with the president like that. Our Soviet financial system was the best in the world and in the 70's. we even surpassed the Americans. this is the opinion of the Americans themselves. We urgently need to analyze the central bank. And amend the constitution that CB. must belong to the state and have the right to finance a deficit of at least 5%. Otherwise, this will be our financial system under the heel of the American Fed company. Comrades who are not without different support the law on the site http: // national law.rf/petit1.php
        1. Botanologist
          Botanologist 17 October 2013 15: 34 New
          0
          Quote: teleset
          and if the state is shy, it will decide to rebuild its financial system so that the Americans will bring down a pile of crap in this country, either a coup or an intervention, or an unfortunate incident with the president


          Iceland reconfigured, like nothing military happened. It’s just that the world media stopped talking about the country at all, as if there wasn’t one. Now Hungary is reconfiguring. Same.
          The United States is weakening, they do not have time to bomb everyone.
  4. IRBIS
    IRBIS 17 October 2013 10: 51 New
    +2
    Anyway, was there a "boy"? Another demonstration to the whole world of the degree of its dependence on the "well-being" of the United States. And, as always, it was a success.
  5. Andrey Yuryevich
    Andrey Yuryevich 17 October 2013 10: 53 New
    +2
    states owe everything, and who will ask them? it’s like a fifth-to-eighth grader school: you owe me ... WHAT ???????
  6. andruha70
    andruha70 17 October 2013 11: 32 New
    +1
    even to me - "teapot" - it was clear that they would raise the "ceiling" repeat but ... they, too, are "teapots" - they do not understand that it is possible to kick in the ears, up to a certain level ... then "not teapots" - they will see what is what ... wink personally for myself, I decided: no doltoaroff ... either movable and not very property ... either rupe and gold-silver ... tongue
  7. Sadikoff
    Sadikoff 17 October 2013 12: 14 New
    +1
    The states ruined the derivatives, issued various financial papers at a cost several times more than humanity produces goods a year. And this problem can only be solved in a revolutionary way in the economy and in the country.
    1. Orik
      Orik 17 October 2013 12: 49 New
      0
      And this question can only be solved in a revolutionary way in the economy and in the country.

      Unfortunately, there will be big problems not only in their country, but throughout the world. Russia in its current form is not going to be very good. In the global division of labor, we are increasingly taking the place of a supplier of resources, losing in our country the production of food and basic necessities. "The one who owns the energy resources controls the countries, the one who owns the food controls every person." Add to this the destructive system of government, the national question, the lack of solidarity among Russians, all this will only worsen the situation. As soon as the dough is not enough, the level of protest activity will begin to rise not out of striving for the high and eternal, but because of elementary discontent, the feeling that they have been deceived (the authorities have been promising for the second decade already) the level of physiological needs, the more acute the situation will be, other factors (management, national, social) will only aggravate it.
  8. Standard Oil
    Standard Oil 17 October 2013 12: 40 New
    +2
    Purely hypothetically, Russia suddenly remembered the "old days", the glorious USSR, gathered courage and decided to return to the United States all that green paper that it had been buying all this time and at the same time will demand payment of all debt obligations that they took with dollars, what will the Americans do? It is clear that accusations of undemocraticism and other water will sprinkle, but in the case of what they can? The paradox that the planet Earth is dominated by a power that has huge and unbearable external and internal debts, like a small planet that is located exactly in the middle between two huge black holes , as soon as the balance shifts a little and a collapse occurs, the planet will be destroyed either by one hole or another, or two holes will merge into one super-massive hole and then it's all the same. What will Russia lose in the event of the collapse of the United States? Russia was raped in this way at least twice in 1991 and in 1998, we will somehow survive it again, but what opportunities will appear when it will not be necessary"to carry tribute to the Horde", and let's see how all the American satellites will sing after losing their Master, and here they will have to pay debts.
    1. HollyGremlin
      HollyGremlin 17 October 2013 14: 07 New
      0
      It would be good. And then we got the power to take a step, only after putting six feather-beds and pillows.
  9. Lindon
    Lindon 17 October 2013 14: 00 New
    0
    The USA arranges a circus and at the last moment everything is quickly decided.
    But Yeltsin and the Armed Forces with Khasbulatov could not agree in the 1993 year.
  10. vitek1233
    vitek1233 17 October 2013 14: 43 New
    +1
    Does this need to be discussed? Dollars is the virus. It is necessary to fight with him, but how, this is a question
  11. ler666
    ler666 17 October 2013 15: 27 New
    0
    CRISIS BENEFITS EVERYONE! But it means he does not end!