US debt - It's politics stupid!

The financial details thrown up by the debate in the US Congress over the argument about raising the country's debt (now well over $14 Trillion) are scary. No agreement would mean that national government (federal) expenditure would cease. As that includes huge payouts to various states, it is likely that the 'rightwing Republican nutters' (Vince Cable) will roll over in the end. Their argument has reduced to the single point that they accept a rise in the debt but they want it to be low enough to have to repeat the same shenanigans next (election) year.

More than 80% of world trade takes place in dollars. China, India and most of the rest of Asia have the bulk of their national investments in US debt. US multinationals - by contrast - have at least half of their wealth outside the country. (Apple, Microsoft and Cisco systems have two thirds of their cash outside the US.)

But is US debt the looming and emergency catastrophe that T Party Republicans make out?

Compare like with like. Under Truman (1949-1953) the US national debt was roughly the same as today. The debt was raised MUCH more by Reagan and both Bushes when they were presidents than it has been by Obama. In the worst economic crisis since the 1930s Obama has, in fact, been comparatively frugal.

Of course American big business is less 'patriotic' today than it was in the 1930s and 1950s (when foreign investment was not such an inviting option - as the figures above serve to show.) But US manufacturing, while shedding labour, is still 8 times more productive - read profitable - than China. (FT 28 July.) And epic tax loopholes still await any serious attention.

No. The problem is not primarily economic. It is political. There is the traditional conservative argument that during a crisis (or any old time) states must reduce spending. Obama's current proposals already comply with that argument. But there is another argument breaking out in the US congress. It is within the Republican party itself. Senator McCain (recent republican candidate for president) called his T Party colleagues
'Worse than foolish' for their tactics.

There is a new force in American politics. Not since the emergence of the Ku Klux Clan in the post WW1 period have we seen its like. This analogy is not miss-cast. The T Party's new right wing mobilisation, which has its republican senators by their tails, is the latest in a long line of huge, popular movements, that would like to re-run the American civil war and get a different result.

Part of the reason it has emerged is the struggle by some poor whites to get to the right position in line as poverty and deprivation grow. Part of it is the naked fear of the vast, national (and international) mobilisation that grew out of the Obama struggle for the presidency. And that is the key to the political disaster facing Obama and, much more significantly, the people who supported him.

Obama's presidential campaign was highly significant in many ways and one of them was the degree to which it reversed the picture of non-participation in politics in the west, and particularly in the US, by large sections of the plebian classes, led by the black and hispanic urban poor. Millions came onto the streets. Millions came out to vote who had never voted or who had previously given up voting. That is the force that the day to day, week to week and month to month reality of his presidency has dispersed. It was already apparent in the battle over Medicare. If Obama had called out the people over Medicare, the opposition would have melted like Alaskan snow in high summer.

Today mobilising the people would break the deadlock over national debt. More importantly it would begin to create the challenge that is, and will be, required to put the right-wing ranters (and their big oil backers) back in their holes - before they gain the confidence to express their rage with guns in their hands.