Who will say 'we can't afford it?'
Had David Cameron won an outright victory last year, then Vince Cable would have gone down in history as the best Chancellor of the Exchequer the country never had. In the event, we ended up with the Cameregg Coalition and Cable is proving to be the most nonsensical Secretary of State for Business we could ever have dreamed of. His latest pearl of wisdom was to blame the US debt crisis on “a small group of right wing nutters”.
It is understandable that most “ordinary” citizens don’t understand that if cutting public expenditure costs GDP growth, it should still not be desisted from. The notion that we have been spending too much money we don’t have is something that they struggle with, mainly because it has never been a topic of serious public debate. Over the weekend, I had the privilege of being introduced to a practising Spanish doctor and one with a stunningly practical outlook on life. Inevitably, the conversation ended up with the question as to what is medically possible, what is financially possible and how does one draw the line between the two. These issues should be filling our TV screens – not celebrity shoe cleaning or cooking for naturists. She gave an excellent account of how the culture has to change, how the 1970s brought the massive advances in medical science and how preserving life “at all costs” had become the maxim. She added that, while developments have raced ahead, the ethical issues which remain in dire need of a review and update have not yet been tackled because nobody dares to be the one who says “No, you can’t have it; we can’t afford it”.
Watching and listening to President O’Bama’s begging speech on the telly last night reminded me of the conversation with the kind lady doctor. Whatever you do, don’t tell the people that they have been getting what you (that is, they) can’t afford and that it is “game over”. His nonsense about the potential for soaring credit card, car loan and mortgage interest costs was not only plain wrong but verges on demagoguery. My worry is that whoever wrote the speech doesn’t fully understand what is going on and, by dint, nor does the President … or at least I hope that is the case, for if they both do understand what they are saying, these inflammatory utterances are verging on the criminally negligent.
I have no more love for most of the Tea Party freshmen who are strutting about and poisoning Capitol Hill – I have this vision of cane toads (Bufo Marinus) – than the next right-thinking citizen but I get the feeling that the White House risks overplaying its hand in blaming the problems on the GOP. The problem is not the Republican grouping in Washington, it is that government is spending more than it has got. O’Bama loves to talk about the hardworking American middle class which is being penalised for the greed of those above them. If a million millionaires each paid a million dollars a year more in taxes, that would amount to just three and a half thousand dollars per head of the population; less than the total cut in spending has to be. I agree with the contention that the Right must concede to the wealthy paying more in tax but it is clearly correct in its view that the meat of the savings must come from drastic austerity measures. I’m not sure that the word “austerity” has entered the Washington dictionary yet … and it urgently must.
O’Bama might of course choose to invoke Section 4 of the 14th amendment of 1868 which declares “the validity of the public debt of the United States, authorised by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned”. This effectively would let him raise the debt ceiling without reference to Congress but the accusation of dictatorship would likely stick to him like whatever to a wet blanket and, already having approval ratings no higher than Dubya did, this would scupper his last hope of re-election. Apropos re-election: so far neither Democrats nor Republicans have been able to generate any public support from their stance on the debt issue and good ole Joe Sixpack is just growing ever more disdainful of the political class. Greece and America are beginning to show worrying similarities.
We can remain, so I believe, sanguine with respect to a solution to the debt ceiling issue being found by Tuesday next but I would love to go with Alex Moffatt of Joseph Palmer & Sons in Melbourne who asked recently why it is that an increase in the debt ceiling does not lead to a downgrade and whether it shouldn’t it be the other way round. You must agree, he does have a point.
Anthony Peters is a strategist at Swiss Invest