America's Shutdown.

Now I'm confused. In Britain when the government wants to introduce a new budget the Chancellor/Finance Minister simply stands up in the House of Commons and reads out the new budget. It then automatically becomes law and some of the tax changes come into effect that very same evening. In America they clearly do things a little bit differently.

Back in February 2010 President Barack Obama proposed the budget for the 2011 fiscal year which runs from October 2010 to September 2011. 14 months later the US Congress is still arguing about it. With more then half the fiscal year already gone and no budget in place the Federal Government of the United States is now on the brink of going into economic shutdown. This means that all federal government employees such as civil servants, FBI agents and members of the armed forces will not get paid and non-essential government services such as national parks and museums will close.

As always in politics the arguments that are preventing the budget from being passed are not so much to do with the issue itself as the issues that surround it. In this case the bigger issue is America's national debt which is approaching it's legally mandated $14.3 trillion limit. Obama and the Democrats want to increase this limit in order to pay for unemployment benefits and stimulus measures that will increase employment. The Republicans want to reduce the debt by introducing more tax cuts for the rich. It has to be said that neither of these ideas are likely to reduce America's debt and clearly no-one has realised that forcing American government agencies to buy their fuel, manpower and bullets etc on credit will only serve to increase America's debt.

Although countries like Japan seem to do just fine with a national debt at around 200% of GDP it is quite difficult to argue that countries shouldn't be concerned about their spending and try to keep their national debt down. However the American Right's obsession with reducing the national debt is something that they've imported from European governments, especially Britain, where debt is more of a problem. By contrast America occupies a much stronger and unique position in terms of debt because the US dollar is the worlds reserve currency. That means that the value of all the other world's currencies like the British Pound, the European Dollar (Euro), the Chinese Yuan and the Japanese Yen only exist as an extension of the value and amount of the US dollars those central banks hold in reserve. As a result if any country were to call in America's debt the first thing that would happen is that the value of the US dollar would drop instantly making the country calling in the debt and all other countries poorer.

This gives America a sort of built in insurance policy against ever having it's debt foreclosed on. It does though make Ben Bernanke's (a Bush appointment) plan to voluntarily devalue the US dollar through Quantitative Easing or currency debasement look stupid to the point of treason. Obviously the central banks behind some of the world's largest currencies such as China and the Eurozone are in the process of diversifying their currency reserves in order to reduce the importance of the US dollar but this will take a number of years so in the meantime America has a lot more wriggle room on it's national debt then the Republicans will have you believe.

Mind you as most of America's national debt comes from Medicare and Medicaid and the Republicans are also objecting to the mandated insurance of Obama's health care bill the fact that Obama and the Democrats haven't been able to avoid this entire argument by highlighting the obvious comparison between the two issues makes me wonder just how useless they really are.