The downgrading of the US triple-A credit rating is the nail-in-the-coffin for Washington’s supremacy. In fact, such re-evaluation of America’s credit worthiness is long overdue. As of this month, the country’s debt has reached $14.34 trillion that translates to an unsustainable 96 percent of annual GDP.
In acknowledging reality, Standard and Poor’s has thrust markets into turmoil at a time when many First World economies are floundering, and within the US the ratings agency has come in for heavy criticism. But it’s time that America’s cage was rattled so that those in the halls of power realize their nation can no longer print money with impunity or use partisan politics to play football with an economy that affects not only Americans but also most of the developed world.
The fact that Beijing – the largest holder of US foreign debt — is wagging its finger at the White House illustrates just how low America has fallen, especially for those of us who are old enough to remember when China was considered one of the poorest countries in the world and “Made in China” a byword for inferior products. Via its official news agency, Beijing has told Washington “to cure its addiction to debts” and “live within its means.”
This, of course, is easier said than done in a country stricken by joblessness where the manufacturing industry is in intensive care and people are losing value on their homes and pensions. Americans have been feeling the pinch since the 2008 economic downturn and many have no belt to tighten further.
Some one million homes were repossessed by banks in 2010 with five million unable to pay their mortgages this year. Tent cities and shantytowns have mushroomed all over the country, one being just an hour away from New York City where ethnically diverse unemployed professionals rely on handouts from churches and the local community. Tens of thousands are sleeping in their cars, tens of thousands more on the street. And, according to the US Department of Agriculture, some 45.8 million or 15 percent of the population is reliant on government food stamps.
The US has been efficient at hiding its poor from the rest of the world indoctrinated by Hollywood and US networks with the American Dream. It wasn’t until Hurricane Katrina when the glare of the world’s media spotlight fell on the impoverished suburbs of New Orleans that non-Americans got an insight into that other America where dreams rarely come true.
The controversial documentary moviemaker Michael Moore blames “big business” and “the right-wing” for “destroying the middle class so they could become richer themselves.” He blames President Reagan and the Republicans for slashing taxes on the rich, ignoring monopoly laws, allowing thousands of companies to merge or be bought out and closed down. He blames corporations for freezing wages and threatening to move overseas if workers wouldn’t accept lower pay and less benefits and for moving jobs overseas anyway. And he blames the “masses” for failing to rise up to protect their jobs and homes.
Professor Noam Chomsky also heaps blame on corporate power for its ascendancy over politics and society. “The comic opera in Washington this summer, which disgusts the country and bewilders the world, may have no analogue in the annals of parliamentary democracy,” he writes. “The spectacle is even coming to frighten the sponsors of the charade. Corporate power is now concerned that the extremists they helped put in office may in fact bring down the edifice on which their own wealth and privilege relies, the powerful nanny state that caters to their interests.”
There’s plenty of blame to go round but if I had to choose one person behind the economic rot it would have to be George W. Bush who bought in to the neoconservatives “New American Century”, a doctrine that was supposed to ensure worldwide American supremacy for generations to come. Bush inherited a fiscal budget surplus of $230 billion and a booming economy from President Bill Clinton that was frittered away on ongoing wars of choice. Bush is also responsible for cutting taxes done primarily to pander to the rich and doing nothing to curb greedy US banks and financial institutions that triggered the global financial downturn in the first place.
Right-wing Republicans and especially the Tea Party movement may be crowing over what they term as President Obama’s failure to turn the economy around and gleefully rubbing their hands together awaiting next year’s presidential election, whereas, in truth, it was their gurus Reagan and Bush who created the house built on sand. Obama’s greatest fault has been indecision. When the US is in crisis, it needs a commander-in-chief who behaves like one and who is willing to bypass a partisan Congress with executive orders. He’ll be remembered as the president who folded in the face of opposition rather than risk raising his head above the parapet.
Today the mighty land of the free and the brave is beholden to China and other Asian states that are propping up its economy with their massive holdings of US Treasury Securities. In fact, two-thirds of China’s $3.2 trillion reserves are invested in US dollar assets such as sovereign bonds. The Chinese are currently in the process of re-assessing that policy and are also calling for a new global reserve currency to replace the dollar. If America’s creditors decided en masse to call-in their cash and switch part of their dollar reserves to other currencies, the US would be staring at the abyss.
As I write, stock markets in Asia, Europe and the US are tumbling, the dollar is falling against its main currency rivals and G20 finance ministers and Central Bank governors are discussing how they can lift their economies out of the hole. The euro zone is particularly vulnerable to the contagion especially as the Irish, Greek, Spanish, Italian and Portuguese economies are less than healthy.
Financial commentator and wealthy investor Jim Rogers predicts the UK will be rated down from its AAA credit status within three months although other experts consider Britain as somewhat of a safe harbor. In truth, no pundit can accurately predict what’s in store; we’re in unknown territory. The US will either manage to ride the wave or succumb to a double-dip recession with other countries falling behind it like a house of cards. What is certain is that the US has lost its political standing on the world’s stage and handed its economic independence to foreign governments. Its role as the world’s policeman has been undermined by Iraq and Afghanistan and it is no longer considered an honest broker in the Middle East.
Will the sun ever shine again on the American neo-empire? Perhaps! But, in the meantime, I wouldn’t bet my home on it and, frankly, with the US right-wing scoring points over Democrats as their country goes up in flames there’s probably much worse to come.
Published in the Saudi-based Arab News on Aug. 8, 2011