The US President, Mr Barack Obama, signed a Bill on August 2, that raised the limit on the amount the US government could borrow. The build-up to it had predicted doom and gloom if the debt ceiling was not raised. But it is time now to look back at the brinksmanship that the members of the US Congress (that is, both houses of Parliament) played and see what it tells us about the political system.
And it was brinksmanship of the worst kind. The papers were full of alarming reports of ‘debt default' — although there was no real danger of a default on debt, some bills that would have fallen due would have been delayed. August 3 was the deadline; the House of Representatives approved a bill on August 1, and the Senate on August 2, and the President signed the bill with just hours to spare. But this deadline was known for months ahead and politicians of all hues had been posturing for it all this time, taking hard positions and trying to add various budget measures to a bill that could have been a straightforward revision of the debt limit.
With the Democrats controlling the Senate and the Republicans controlling the House, little was getting done.
PARTY SPOILERS
The problem lies in the nature of the US political system, which was path-breaking at one time, but is now increasingly dysfunctional.
Technically, the US has a two-party system. The Democrats are known to favour an important role for the government in the economy, and support social programmes. The Republicans are known to favour smaller government, lower taxes, and believe in private initiatives.
However, with the Republican leadership not seen as sufficiently conservative, a new group within the Republican Party emerged in 2009 that called itself the Tea Party, creating further divisiveness. A movement of loosely affiliated groups rather than a political party, it takes its name from the Boston Tea Party, a protest in the late eighteenth century against the British imposition of tax on the colonists.
This does not mean that the US now operates a three-party system. In reality, the country operates as if it has no parties, because each member of Congress operates independently, irrespective of party affiliation. The system of primaries to pick candidates and their having to raise funds independently gives the party leadership little leverage. Even if the leadership of the two parties negotiate a compromise bill, there is no guarantee that it will pass the two Houses.
Although there are official leaders of each party in the House, they are not very effective in getting members to vote along party lines. Thus, each member makes his or her own deals and a sufficient number of them can derail any bill. In the final bill to raise the debt limit, 49 per cent of the Democrats and 38 per cent of the Republicans voted against the bill in the lower house.
ECONOMIC SYSTEM
This is all very well if there is infinite time available and the issue under consideration is putting up a new statue. Then the politicians can behave like a college club running a model UN. But with an anaemic economic recovery in the US, and collapsing economies in Europe, the global economic system is being further weakened by irresponsible behaviour by major economies.
And the arguments and positions taken by many US politicians have not been setting the right tone for companies to judge the future investment climate. And they are presently judging it negatively, like Standard & Poor's did when it downgraded the US credit rating, basing its judgment on “the degree of uncertainty around the political party process.”
If the political parties in a democracy cannot agree on even a minimum agenda and individual elected representatives can derail consensus, it is proof of a broken system.
After passing the requisite bills, all the members of Congress went home for a month's vacation, caring little about completing one more piece of legislative work. The act governing the Federal Aviation Administration (FAA) had expired and the two major parties could not agree on its renewal, for they wanted to stick in two provisions to do with subsidies for rural airports, and how unions would vote.
This resulted in airport construction projects stalling, and a federal tax not being collected on airplane tickets. More than 70,000 construction workers were laid off and approximately 4,000 workers of FAA had to be furloughed. Party leaders finally had to scramble and use emergency provisions to approve a renewal but not before considerable revenue was lost.
Inept politicians can do great harm to a weakened economic system. We are seeing that in Europe, as politicians in Greece, Portugal and Italy are unable to come up with tough decisions. Politicians in India are ruining state budgets and creating problems for the future by giving away free goodies and maintaining unsustainable subsidies.
The US members of Congress need only look at Japan to see how narrow political rivalries has kept that country stagnating for decades, and try to learn some lessons. That the US is heading down Japan's path is obvious when political observers start calling the US political drama as ‘kabuki', the Japanese drama style that involves elaborate dresses and swaggering. We saw that ‘kabuki' when the US politicians tried to reform the health care system not too long ago. It is now becoming a refrain.
(The author is professor of International Business and Strategic Management at Suffolk University, Boston, US. blfeedback@thehindu.co.in )