The Party’s Over: US Republicans Agree to Tax Rises For First Time in 20 Years!

US Senate votes 89-8 in favour of Taxpayer Relief Act; 'nearly US$100trn' of unfunded liabilities 'remain undiscussed' http://t.co/7MtG7qkj

— ッ MEDIOLANA® EDU (@Mediolana) January 1, 2013

The United States of Debt: America on the Ropes?

The twenty-first century has thus far been a time of incredible flux. The ushering in of a new millennium has been followed by historic event after historic event: the War on Terror, the rise of the BRICIS (with China centre stage), and the Arab Spring – all of which could have been epoch-defining events in their own right during less pulsating times – compressed within a decade. But even these remarkable occurrences could be eclipsed by ongoing developments in the United States of America, the world’s undisputed hyperpower as recently as the year 2000 but now a country experiencing fundamental structural problems on a scale that would have been inconceivable to all but the most visionary as little as five years ago.

The present pressing issue is simple: the US is in an economic and administrative decline so precipitous that its government is in danger of defaulting on its debt – and as soon as next month. As surreal as it is to convey, the fact is that as things stand, the United States is scheduled to reach its own statutory debt limit of US$14.294 trillion on 2nd August 2011. This figure represents what the government is legally allowed to borrow; beyond this point, the federal government will be in default on its obligations.

At the time of writing, the US Congress was desperately trying to thrash out a deal to enable a new law to be passed which would raise the debt ceiling yet further while attempting to implement a wave of fiscal reforms, such as tax increases and spending cuts. But even if this succeeds, the medium- and long-term prognosis for American government debt control is not at all promising: meaningful economic growth is a distant memory; the population is ageing, increasing social security and medical care liabilities; and military expenditure, seemingly entrenched, has spiralled out of control.

The consequences of an American debt default are virtually unfathomable. At best, one would witness the pronounced but relatively gradual final decline of a country that remade much of the world in its own image and was outlived by its progeny; at worst, the effects of a default could lead to a global fiscal and psychological haemorraghing the ilk of which may have no historical precedent.