Eye On The World: Obama Pitches Debt Plan Plea To Americans

Glenn Williams hosts Eye On The World, a weekly look at foreign affairs with Scoop's Selwyn Manning. This week: US President Barack Obama Pitches Plea To Americans To Message Their Congress Representatives.

US President Barack Obama Pitches Plea To Americans To Message Their Congress Representatives

The United States's debt crisis has reached a stalemate due to Democrat and Republican Congress representatives refusing to make a compromise over their parties preferred debt reduction plans.

The Budget crisis has caused President Barack Obama to issue a plea to Americans, asking them directly through a televised and webcast speech, to send a message to their representative in the US Congress, to urge them to think through what is best for the United States rather than what is best for their political parties.

OBAMA WITH AUDIO:
3:50 TO 4:22

Obama's favoured approach is a budget plan that lifts the US$14.3 trillion debt ceiling, and sheds US$4. Trillion of US Federal Government expenditure... overtime.

Obama insisted that the US needs to live within its means, that every American needs to contribute to get its books back in balance.

He said that the US Government must make cuts to its defense spending, make modest adjustments to Medicare, and take a balanced approach that preserves some entitlements for US citizens.

As ABC reported last night, Obama's plan, backed by the Democrats in Congress, would see a $2.7 trillion deficit reduction over the next decade, but with a debt limit hike that would carry through the November 2012 elections.

The GOP, the Republican representatives disagree. They advocate a deep spending cuts approach, that is a two-stage deficit reduction plan that would start with an initial $1.2 trillion in savings over 10 years.. They are refusing to compromise.

House speaker John Boehner insists Obama will not get a blank cheque to raise the debt ceiling...

WITH AUDIO:
0:00 TO 0:32

The dilemma exists as the Obama Administration seeks to meet interest payments on its debt, debt that amounts to US$14.3 trillion.

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Obama cannot action his economic plan without the support from the majority in Congress. If the Republicans do not compromise then the United States will default on its debt interest payments.

Obama says, the consequences for this within the United States is...

The consequences for the rest of the world is similar... due to the US economy being an intrinsic driver and indicating factor that influences the confidence-factors that underscore the performance of the capitalist economies around the world.

But Republican Speaker of The House, John Boehner, is adamant that he had attempted to work through a plan with Obama but nearing a compromise, Obama upped the ante...

WITH AUDIO:
0:49 to 1:18

Boehner insists that the Senate will consider a bipartisan bill that will be sent up to President Obama for him to sign, and if he does so, then the crisis he has created will simply disappear.

One way or another, someone will have to back down and lose face or the US will self-consume itself.

The causes of the crisis are not just political. This occurs as the US like other western economies adjust to a new age of economic solution. Domestically in the US, the values of debt laden assets had been permitted to inflate arguably due to an ease to acquire credit that increases demand. The consequence of this is a pattern of hiking prices.

Other contributing factors include the decisions made by this dude:

WITH AUDIO:
0:02 to 0:23

The Bush Administration inherited a surplus from the Clinton Administration.

But through the pursuit of an aggressive foreign policy, ...

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… and fighting two major – Iraq and Afghanistan - wars on two fronts, the United States lost its hold on its economy.

Bush relied on Europe coming to the war table. While in reality Germany and France refused to comply with Bush's demands. At the same time the Bush Administration cut revenue to pay for its policies by slashing domestic tax rates. It balanced the deficit by offshore borrowing.

This stuff is not rocket science. Even from down here in New Zealand, back in 2002 for Scoop, I wrote a piece called Imperial PAX Americana where we argued:

Imperial PAX Americana: Should Germany not come back to the war-table, billions will be siphoned from the US economy. Forget Medicaide, forget government assisted housing programmes, forget moves toward education equality, and most destructively, a predicted end through necessity to United States industrial protectionisms, removal of subsidies to heavy industry and commodity producers.
We wrote: Without such protectionisms, United States industry and manufacturers will surely collapse. It cannot and will not compete with low GDP, high labour-force economies of ASEAN, APEC...
Faced with economic collapse, the ‘American People’ would face failing consumerism, a domestic economy in freefall, societal chaos, and the further collapse of the United States’ pillar institutions.

Back to today, the consequences of all this has rendered the global economic system chaotic, and ironically, has paved the way for the supremacy of the United States economy to become secondary, from a growth perspective, to the Chinese economic powerhouse.

Obama's plea to the American people is late. Commentators say Obama needs to drive through massive structural changes to address the underlying causes of this crisis.

OBAMA WITH AUDIO:
12:29 TO 13:11

Obama has until August 2 to sort this mess out. If he does not, the US will default, lose its triple A credit rating, spark interests rates in the US and abroad to spike upward, cause further collapse of the US domestic economy.

Here is Bloomberg's report on it, this commentary being from Michael McCarthy, a Sydney-based chief market strategist with CMC Markets.

WITH AUDIO:
0:09 to 0:57

GEOPOLITICALLY, since the presidency of Bill Clinton, the United States' foreign and economic policies have permitted a vulnerability to develop that has seen the United States' foes maneuver to assist its descendancy from sole superpower status. That fact looks set to continue.

Eye On The World broadcasts on KiwiFM and Radio Wammo at 7:40am on Tuesdays. Video on demand episodes also webcast on Scoop.co.nz.

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