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Editorial: Twilight of US economy
Although there was never any doubt that the US government would not default on its financial obligations, the debt ceiling battle between President Barack Obama and the Republican-controlled House of Representatives over the past two weeks kept global financial markets in jitters
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A
lthough there was never any doubt that the US government would not default on its financial obligations, the debt ceiling battle between President Barack Obama and the Republican-controlled House of Representatives over the past two weeks kept global financial markets in jitters. The eleventh-hour deal on Sunday night may allay market fears, but the episode serves as a reminder of the weakening US economy and its diminishing role and influence on the world economy.
A default would not only have meant a failure to pay all of its bills beginning on Tuesday. It would also undermine the credit rating of the US economy, which in turn would hurt international confidence in the US dollar.
A potential catastrophe had been avoided, but the rest of the world needs to adjust to the reality that the US economy is on a decline, if not in absolute terms, certainly relative to the rise of Asia’s new economic powerhouses — China and India. The US will remain the biggest economy in the world, but China, already in second, is catching up. The US role and influence in global trade and investment will decline and with it, the role of the US dollar in international trade and finance.
Washington politics, an internal matter for Americans, is not helping. It may even precipitate this decline. The debt ceiling battle showed that politicians on both sides of the fence were willing to push their fight to the limit, risking not only the US economy, but also the global economy. Obama refused to make deep cuts on his big social spending and the Republicans refused to raise taxes. With both sides training their sights on the 2012 elections, they stood their ground until the very last minute.
It is Washington politics at its worst, one that shows a lack of leadership in asking Americans to make the necessary economic sacrifices. It also shows a nation that is increasingly failing to live up to its responsibility as a global economic power.
The world had better be prepared for a faster decline of the US economic role with all its dire consequences.
