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|It´s their Tea Party and the world is not invited|
The Times - August 1st 2011
The Founding Fathers must be chuckling in their graves. They designed the American constitution, with all its checks and balances, expressly to thwart decisive government, and they have certainly succeeded spectacularly in that aim during the farcical argument over the raising of the country’s $14.3 trillion “debt ceiling” (a sort of legal overdraft limit) to avoid a default or a mass of spending cuts tomorrow. The thought of what that argument has done to the country’s international credibility and prestige might, however, be enough to wipe any grins off the ghostly faces of Thomas Jefferson, George Washington and the rest.
One noteworthy fact, admittedly, is that throughout this process virtually no one has expected America actually to default, or even to have its credit rating downgraded from triple-A. Compare the run-up to this past weekend’s negotiations with those before the eurozone’s emergency summit on July 21st: while euro-zone bond yields, especially for
Perhaps the markets adhere to Churchill’s cynical view of his allies: “You can always rely on the Americans to do the right thing…after they’ve tried everything else”. Perhaps by being so calm, this means that the eventual storm will be truly horrendous. More likely they have seen it all before, the eleventh-hour negotiations at which a bad deal is done, but at least it is done, and as yesterday’s bargaining closed in on a supposed $3 trillion of spending cuts over ten years they looked like being proven them right. More deeply, their impassiveness may well reflect a feeling that the real issue is a rather more long-term one than has been represented by a somewhat artificial deadline such as the debt-ceiling expiry on August 2nd.
The real issue comprises a medium-term phenomenon and a longer-term question, though they are closely related to one another. The first of those is symbolised by, but not limited to, the group of Republican conservatives inside and outside Congress who call themselves the Tea Party.
That group, whose heroines are Sarah Palin and a fiery congresswoman from Minnesota, Michele Bachmann, has held a position during these negotiations over fiscal reforms and the debt limit that is analogous to that of John Major’s “bastards” and the most virulent Tory Eurosceptics in 1992-97: when there is a small Parliamentary or Congressional majority, a group of zealots can gain a blocking veto power far beyond their actual numbers.
A historical analogy that is closer to home and of greater significance would, however, be the isolationist movement during the 1930s. The Tea Party’s position on
It is insouciant and isolationist because
Like the America First movement in the 1930s and the early years of the second world war, they argue that the country should leave the world to sort out its own problems, while
When the global financial crisis broke in 2008, many worried that it would produce a wave of protectionism, especially in the
It would be wrong to over-state the Tea Party’s current importance: it remains a small but vocal minority, and unless there is yet another last minute stumble, it has lost its immediate fight over the debt ceiling. But the big medium-term battle is for the White House and control of Congress in the November 2012 elections. It would be comforting to believe all those ordinary people interviewed on BBC bulletins who say they are maddened by the irresponsible behaviour of Congress, especially the Tea Party blockers. Yet they are being interviewed in
As they do, the longer-term issue will be at centre-stage: can the American economy do what it has done before, and revive and reform itself from the bottom up, despite the unhelpful shenanigans in
The latest economic data, released last week, showed a similarly stagnant picture in
This will go on for quite a long time to come. At first, fiscal policy was a solution, since borrowing stimulated the economy. Now it is a problem, because cuts, however necessary, depress demand. In America, where the cuts are anyway being deferred, there is an added complication: the long wrangle over fiscal policy and the size of government, which will run up to and beyond the 2012 election, is producing a thick fog that obscures not just the fiscal future of the country but also the future of America’s relationship and attitude to the outside world.
In that highly uncertain, foggy environment, it would be truly miraculous if businesses were to decide to go on an investment spree in