August 01, 2011

Opinion: Last-minute compromise in sight in US debt crisis

http://www.dw-world.de/dw/article/0,,15280736,00.html

Barack Obama and leading members of the Republicans and Democrats have finally reached a deal on the US debt limit. Hopefully, this will end the political posturing in Washington, says DW's Christina Bergmann.

The battle is still far from won - but its end is in sight. When President Obama announced late on Sunday that a compromise had been reached in negotiations to raise the US debt ceiling, the markets in Asia were just opening for business - and the global sigh of relief was palpable.

But the compromise Obama and leading Republicans and Democrats managed to agree on must still be pitched to both parties' fellow members. It's not a done deal until both the Senate and the House of Representatives have given their approval, which is expected to happen on Monday and is by no means guaranteed.

There will still be legislators who refuse to vote for the compromise. On the Republican side, that's because some hold firm to the principle of not raising the debt ceiling or because they feel cuts in social spending are not deep enough.

Some Democrats, on the other hand, oppose any cuts in social welfare programs.

It has already been difficult to understand this unwillingness to find a compromise, but at this point, such a stance amounts to an unprecedented irresponsibility.

Ticking clock

Time has run out for making any more improvements to the deal. The clock is ticking down to Tuesday when the US government would lose the ability to take on any more debt.

What this sets in motion will have serious consequences for the very people the hardliners of both political parties are supposedly trying to protect: the poor will no longer receive social security checks if the debt ceiliong is not raised and small businesses will no longer be able to take out loans if interest rates rise. There should, therefore, be no question of agreeing to the deal and raising the debt ceiling.



Especially since the compromise accomplishes something else as well: it decouples the disastrous bond between raising the debt ceiling and negotiations on budget cuts.

After all, the necessity of bringing down government spending is something both sides agree on. A national debt of $14.3 trillion (10 trillion euros) is not acceptable. But the threat of using the stalled negotiations to plunge the nation into a financial and economic crisis that would have global implications suggests that the negotiators, in particular the Republicans, were not aware of the consequences - and were not willing to depart from their standpoints.

Ending the drama

It was, finally, the President who gave in: unlike his previous demands, the deal now does not provide for immediate tax increases. But they can and will be negotiated within the bipartisan committee. The important point is that a debt default can be avoided, as can a possible downgrade of the US credit rating.

This is also due to the fact that Obama insisted on raising the debt ceiling to such an extent that the same political drama won't be repeated six months from now. Indeed, it is unlikely that the financial world would tolerate this drama for a second time.

Anything other than the approval of the deal in Congress would be a disaster - and it would be political suicide for party leaders, especially Republican John Boehner who has not come across well in negotiations this past week.

Let's hope that the self-inflicted crisis of recent weeks has now been averted and the administration and Congress can turn to the actual dilemma they face: high unemployment, an exorbitant national debt and a still ailing economy. It's high time.

Author: Christina Bergmann /db/ccp
Editor: Michael Knigge

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