Economic woes eclipse America’s future
AND not surprisingly yet enough, the all times claimed sole superpower, the United States was likely to default in a way that Washington seemed more worrisome regarding its debt ceiling ((albeit suspended till January 2025). Despite the newly negotiated terms between the Biden administration and congressional Republicans, the danger is still looming over the medium term. The US top economists fear that the escape from an economic disaster would hardly be possible, making an academic inquiry– how will America recover from its economic crisis.
According to the New York Times, ‘’ The United States faces an “elevated risk” of running out of cash to pay its bills between 2 and 13 June. But fortunately, the Biden administration saved US’ economic default as US President Joe Biden and top Congressional Republican Kevin McCarthy reached a tentative deal to suspend the federal government’s $31.4 trillion debt ceiling on 27 May, ending a months-long stalemate. Earlier, Biden’s administration had no unwillingness to negotiate the debt ceiling as President Biden desired to lift the debt ceiling. The negotiators have agreed to cap non-defence discretionary spending at 2023 levels for one year and increase it by 1% in 2025, a source familiar with the deal said.
The analysts in US think while Biden may be right on the merits, the US system of government does not always settle disputes based on who is right on the merits. Had the Congress not extended the debt terms, it would have caused fatal repercussion to American economy, including hardship to American families, damaging US’ global leadership position and most importantly raising questions about US’ ability to defend US national security interests.
Arguably the seeds of economic stagnation were already sown in the Trump era: ‘’The US unemployment rate was more dismal, surging to a record 14.7% in April 2020, almost twice during the financial crisis between 2007 and 2009. At the end of 2020, Trump lost to Biden in the presidential election, and fierce clashes broke out between supporters of Trump and Biden, throwing the political situation into turmoil. It is fair to say that 2020 witnessed ongoing intertwined political, economic and social conflicts in the United States. In 2021, as the impact of the epidemic gradually stabilized and the global economy began to recover, US’s real GDP rose by 6.2% year on year in the first half of 2021, seemingly indicating it had managed to survive the short-term impact of the pandemic. However, its GDP growth slumped to 2.1% in the third quarter of 2021’’.
And yet, the economic critics blame that President Biden and his advisers apparently have never heard the economic axiom, “There’s no such thing as a free lunch.” Because Biden insists that his trillions in additional federal expenditure cost nothing, he can feign— as he and his advisers have done—that his economic agenda will not impose a “single penny of additional taxes” on Americans who earn less than $400,000 annually. Moreover, Biden proclaims, “Everyone benefits.” Conversely, the critics think that this one claim—that spurred government expenditures could come at no cost— rather, it would put President Biden’s position in grave jeopardy.
Further, the critics think that Biden’s industrial policy– largely coming from the right—seems futile to work. “In case after case, industrial policy plans sound good on paper and generate impressive results in various academic models,” Scott Lincicome, the Director of Economic Studies at the pro-free-market Cato Institute, added. “But they are ultimately distorted by politics, bureaucratic inertia (or incompetence), pre-existing policies, private or public resistance, or unanticipated market developments.”
From the Republican point of view, the Biden administration has shown its ineptitude to address the most pertinent economic challenges that America faces today and they apprehend that If America had undergone an economic default, the repercussions could have been drastically unpredictable such as:. Orders for Chinese factories that sell electronics to the United States could dry up, Swiss investors who own US Treasurys would suffer losses, and above all, Sri Lankan companies could no longer deploy dollars as an alternative to their own dodgy currency.
Nevertheless, there is yet, an endless debate about how much Biden’s initial policy shifts gave rise to the current twin crises::a reasonable bet is that his immigration moves did help inspire the migration surge, while his oil-lease policy will affect the price of gas in 2024 but didn’t change much in the current crunch. But a deeper analysis suggests that both policy shifts framed the ongoing economic crises, however unintentionally, as things the Biden administration sought — more illegal immigration and higher gas prices, just what liberals always want! And then instead of a dramatic attempt at reframing, prioritizing domestic energy and border enforcement, the Biden policy managers fiddled with the optics that warranted only temporary fixes.
A Republican view holds– while turning the dials on the strategic petroleum reserve and generally confirming the public’s existing bias—vindicates that if one wants an enforced immigration reforms, including the oil production policy seriously, one should rely much on Republicans. The estimate shared by the IMF Managing Director Kristalina Georgieva, envisaged the global economy will lose $28 trillion in economic output from 2020 to 2025. As for the U.S. economy, the mammoth challenge is to regulate its economic policies in a manner that it must recover from a sick economy.
Thus, against this backdrop, strange as it may seem, America– a nation once intoxicated in its global power clout — now appears to be obsessed by its economic-cum-political decline. America’s list of economic woes seems manifold: Heightened inflation; supply-chain disruptions; labour market turmoil, and debt-ceiling. Moreover, real wages are falling; productivity growth is getting down; companies are losing profile in global markets; white-collar jobs are no longer secure; the nation’s infrastructure is drastically collapsing; the federal deficit is extremely soaring; the health system is completely deteriorating; The cities are being unsafe; the schools are failing; and above all; the gap between rich and poor is yawning. This all manifests America’s economic fall causes its political decline.
—The writer, an independent ‘IR’ researcher-cum-international law analyst based in Pakistan, is member of European Consortium for Political Research Standing Group on IR, Critical Peace & Conflict Studies, also a member of Washington Foreign Law Society and European Society of International Law. He deals with the strategic and nuclear issues.
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