Timothy Renshaw

America’s staggering debt the real antagonist in Back to Obama 2

The U.S. and its leaders will “have to learn to get along” to have any hope of avoiding a Thelma and Louise plunge over the “fiscal cliff”
Tue Nov 13, 2012 12:01am PST

Coming soon to a political theatre near you for the next four years: Barack Obama, The Sequel.

Like most sequels, it includes many familiar faces. The plotline is likewise largely unchanged from the original. That’s a good news/bad news story for B.C.

Conventional wisdom from economists and political analysts is that a second Obama term would include a number of positives for B.C. and the rest of Canada.

Among them is continuity – the Democrat devil we know being better than the Republican devil we don’t.

Obama initiatives to streamline border security and cross-border trade will also be left intact. The reduced likelihood under Obama of significant American business tax cuts that would erode another competitive edge for Canadian companies will likewise be good news for companies in B.C.

But the overriding theme to the Obama sequel is this: the American economy continues to dodder toward disaster, and the country appears to be so mired in polarized politics and partisan sniping that doing anything meaningful to start reversing the alarming economic decline is well nigh impossible.

As Frank McKenna, Canada’s former ambassador to the U.S., recently pointed out to BIV, the American system is based on building consensus. But not much consensus building has gone on south of the border for years. So the U.S. and its leaders will “have to learn to get along” to have any hope of avoiding a Thelma and Louise plunge over the “fiscal cliff.”

They’ll also have to learn to live with some basic and distasteful economic realities.

The fiscal cliff refers to the end of Bush-era tax cuts and the start of Budget Control Act spending reductions – an early 2013 combination that analysts say could carve four percentage points out of the U.S. GDP. Avoiding it includes raising the country’s debt ceiling beyond its current US$16.4 trillion borrowing limit to allow the U.S. to avoid defaulting. That’s going to take some significant political sleight of hand.

America’s fiscal challenges cannot be overstated.

While its national debt is estimated at around US$16 trillion, that number does not include the federal government’s unfunded benefit liabilities and obligations.

In their entertaining and informative book Empire of Debt, William Bonner and Addison Wiggin quote sources that peg the country’s actual debt at anywhere between US$45 trillion and US$74 trillion.

The costs of servicing that debt are astronomical.

Even though B.C. and the rest of Canada have made great strides in building new markets for the country’s goods outside of North America, the U.S. remains vital to our present and future economic well-being.

This time around President Obama has the advantage of being freed from the constraints and distractions of seeking re-election to another term and playing the starring role in Back to Obama 3.

But the reality is that the fate of America might well lie more in the hands of its major creditors than it does in the country’s president, regardless of whether he were Obama or Mitt Romney.

That promises to result in an unhappy ending for the U.S. and B.C. •

Tags: economy, election, Barack Obama, North America, federal government, Mitt Romney



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