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Oct 18, 2013

Some sense on US default in Aussie media

Anyone trying to understand the standoff in the US over the continuing resolution and the debt ceiling is ill served in the main by the local media, especially the ABC.  Most of the reporting seems to have been done on the back of watching Chris Mathews and MSNBC or reading the New York Times.
Most seems to revolve around the scenario of nasty bad ol crazy Tea Party whackos determined to get their own way by holding the nation to ransom at the risk of turning the world upside down with total economic destruction.  US readers will be familiar with this.
One of our saner economic correspondents, Terry McCrann (top) has taken issue with this, as reported in the Bolt Blog: 
JUST about everything you have read or heard about the US political brawl over spending, Obamacare and the debt ceiling, is almost certainly wrong. 
In particular, that the whole world has been taken right to the edge of a financial crash at least as bad and indeed likely to be much more dramatic and more fundamentally destructive than the Global Financial Crisis, thanks to crazy Republican Tea Party extremists… 
The truth is, [default] would only happen if the Obama administration deliberately chose to break not just the law but its fundamental constitutional obligations… 
First, the US government is constitutionally required to prioritise its debt obligations. Secondly, self-evidently, it can repay debt maturities with new borrowings - as that would not increase its total debt… 
The debt ceiling is one part of a much broader, more fundamental and indeed existential battle underway in the US - caricatured asininely by the media there and here as crazy extremist Tea Party types prepared - indeed wanting - to topple the whole structure of government in the US… 
Just maybe, some Americans might think that running a government where 20c or so of every dollar it spends has to be borrowed, can only end in tears… 
All this is mere byplay to the fundamental problem, that under Obama, a big structural deficit has opened up, with the government now spending about 4 per cent more of GDP than in 2001.
McCrann may be underestimating the rate of expenditure; most reports put the borrowings at over 30c in the dollar.  The facts are that in an annual budget (for want of a better word seeing none have been passed since the current administration took office) of more than three trillion dollars, over a trillion is borrowed.
The Democrats are running the joint like a private citizen who takes out a second mortgage to fund high living and lavish piss-ups.

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