A Final Word (Hopefully) on the U.S. Shutdown


How to evaluate the outcome of the 16 day U.S. government shutdown? Most “referees” judge that President Obama won by a knockout. “Republicans backed down,” we are told. “The President got an extension of the budget and the debt ceiling without caving in to Tea Party demands. In addition, Republicans are being blamed. No contest.”

There are, however, more losers than just the Republican Party. The image of the United States as the world leader was seriously damaged. How can the rest of the world rely on the dollar as the global currency when the Congress cannot responsibly manage its national budget and debt ceiling?


President Obama has tried to be magnanimous in victory. He has to be since the fight will continue. New deadlines have been set for January 15 and February 7. We are currently witnessing a cease fire between two exhausted forces that are regaining strength before continuing the hostilities. Congress’ popularity is at an all time low of less than 10%; the President has had a momentary bump in the polls. But, the general perception of the government has come under ridicule.

Besides the billions of dollars squandered, there are deeper, long term consequences from the shutdown. Serious investors will start looking for more reliable places to invest their money besides in dollars. Hegemonic powers like Great Britain were able to have their currency dominate the globe. With the decline of United States power, there will be an obvious de-Americanization tied to the dollar as well. Other currencies, or other more reliable investments, will become more attractive.

The shutdown has shown that the United States is incapable of regulating its internal affairs; it has shown weakness as a responsible global leader. While the extreme Republicans were only concerned with satisfying their local voters, the world looked on bewildered at the insular nature of the domestic debate. Most economists have stated that if the situation had not been resolved by October 17, there would have been a global economic catastrophe.

Senator Ted Cruz and his Tea Party followers are not just leading a marginal political group; they are exposing the vulnerability of the American system. The candidacy of Sarah Palin of the Tea Party to be Vice President in 2008 was somewhat amusing. This time, the radical Right was well financed and well organized. They cannot be dismissed domestically, and they are having an important influence on America’s role in the world.

How can President Obama claim to be upholding international norms when justifying eventual intervention in Syria when he cannot control his national Congress with potential disastrous consequences for the world? The lack of national leadership within the United States has international implications.

My financial advisor wisely tells me to avoid unnecessary risks by diversifying my investments. I would think that wise economic and political government advisors around the world are giving similar advice to their leaders following the crisis. De-Americanization may be starting, not because of the rise of emerging powers, but because of internal U.S. folly. Much like the implosion of communism in the former Soviet Union, democracy/capitalism in the United States is showing its limits. It remains to be seen whether or not the Tea Party and its followers realize or care about the consequences of their actions.

October 21, 2013

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