At midnight Washington DC time on Monday night, the American government officially defaulted on their debt, creating the biggest budget crisis the superpower has experienced in 17 years. With a lot of information flying around, how can you find out, in a simple way, what’s going on and who’s to blame?
We’ve brought you a summary of the problems currently facing the American congress and the potential global effects it will have if the crisis isn’t resolved.
Photo: blogs.knoxnews.com
So. what exactly has happened?
America has what is called a debt ceiling; this simply means the limit of money the US federal reserve can borrow. Set at $16.7 trillion, this money is essential the budget of the American government; to pay military salaries, the operation of government institutions and a number of other debts. America has been operating with costs very close to that number since May. Usually, when this occurs, when October approaches and the US congress sits down to hammer out their budget, the debt ceiling is raised – i.e the amount of money America is able to borrow in order to pay it’s bills is covered.
However, this year, it has so far not happened. This is not the first time in the Obama administration that this has occurred. In 2011, global markets began to set themselves for crisis mode in the event that the debt ceiling for America was not raised. The IMF even intervened to tell the US government to come to an agreement on a deal. In this instance, the crisis was avoided at the final hour after Republicans and Democrats agreed to increase the debt ceiling.
This time, if an agreement can not be reached by October 17, America will not have enough money to continue covering its debts without violating the law.
Why has it happened?
The “why” of this situation really depends on your political views and who you believe. But one thing is agreed on by both sides – this fight is not really about the debt ceiling crisis, it’s about Obamacare.
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Given the nickname of Obamacare, this refers to President Obama’s liberal plan to provide universal health care for all Americans by making it illegal for an American citizen not to have this. While there a lot more complexities in the issues you can get bogged down in, this is the simple version of it. The idea behind this is that it will ensure no American citizen is denied the right to healthcare as a result of not having insurance; which previously in America meant you couldn’t receive medical attention for even the most serious of conditions if your health insurance didn’t cover it or you didn’t have any.
What’s the problem with Obamacare?
The Republican View: We don’t want Obamacare. According to the Heritage foundation, a powerful Republican organisation in America, Republicans “believe the American people deserve an exemption from Obamacare.”
Photo: mereorthodoxy.com
The reason for this is because Republicans believe that this “unworkable law”, which has been taken to the Supreme Court, the highest court in the land in recent years, over accusations from Republicans the law was unconstitutional (the ruling stated this wasn’t true). Republicans say that Obamacare will raise increase the amount individuals have to spend on healthcare, cut worker’s hours, make it more difficult to find a job and force many American’s off their existing health insurance. It is important to remember that all these points are not necessarily accurate, but are the arguments Republicans are making against the plan.
The Democratic View: In a nutshell, Democrats are pretty peeved at the situation they now find themselves.
Photo source: NYdailynews.com
With Republicans unable to stop Obamacare being rolled out (whose reforms were rolled into practice yesterday), despite the fact the legislation was passed by Congress, Democrats believe this refusal to agree over the debt ceiling is a way to get back at the Democratic party over Obamacare.
President Obama has said that Republicans are currently holding “the entire economy hostage” over their opposition to his healthcare reforms, adding that “”They’ve shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans.”
Staunch Republicans have refused to agree on a budget for America – i.e, whether to raise the debt ceiling or not – unless Obamacare is essentially picked apart.
Bloody Hell, they’re like children….
The situation is undeniably ridiculous. Angered by their inability to stop Obamacare becoming a reality, the Republicans are attempting to exhaust their last avenue of action by refusing to agree to a new budget and budget limit unless Obamacare is gotten rid of. President Obama and his Democrats are refusing to bow to this demand. Republicans hold power in one parliamentary chamber while Democrats hold power in another; hence, the gridlock.
Photo: lackuna.com
What now?
The reality is that the US government desperately needs to come to an agreement on this situation before October 17. America has already saw a number of government run institutions and attractions – such as its famous museums and Statue of Liberty – closed to the public as a result of the government shutdown. Thousands of government workers have been put on indefinite, unpaid leave while the crisis rumbles on.
The Democrats are taking a sit back and watch approach; they are firmly placing blame at the feet of Republicans. Republicans are taking the opposite view. The reality is, unless the US government can come to an agreement before October 17 – just over two weeks away – there will be panic on the global markets. Without a resolution, America will not be able to repay it’s debts and will send the US economy into hyperspin – and as the 2008 financial crisis saw, a US economy in a tailspin has a global affect. Market shares will plummet, those who are owed money by the US government will begin to panic and in essence, an economical Armageddon will be created.
The next two weeks are going to be very interesting.
WhatToKnowNow 
How the GOP can (maybe) now win this showdown…
Okay so all except the most one-eyed conservative has to admit the reality that the GOP will be blamed by voters for the budget / gov’t shut down crisis. But an interesting thing may very well happen on the way to next month’s circus.
The debt ceiling D-Day is just around the corner. In fact it’s so close that it now seems VERY probable that the budget / shut down crisis will not be resolved by mid Oct and THEN an interesting thing may happen – the budget / shut down / Obama-care crisis and the debt ceiling crisis will combine into one ENORMOUS crisis that revolves around both issues.
This could be VERY interesting. Mainly because just as the public supports the Dems on the budget / shut down issue, they broadly support the GOP on the debt ceiling issue. So if the two fights turn into one BIG fight, who will the public end up supporting?
It could be a hail-mary / gift from God situation that saves the GOP.
Boehner has made it clear that he wanted to avoid the shut down confrontation in order to save his ammo for the debt ceiling crisis. And he may kinda sorta get what he wants now. The conservative wing of the GOP (I think that may be me) may then get what they really want – the opportunity to force changes to the ACA set-up with the FULL BACKING of the US electorate. Because the political conversation / vicious trench war will be about balancing our national kitty, we can make changes to Obama-care by making the simple argument that the US simply can’t afford the ACA. Because it is a financial reality and not an ideologically based argument, independent voters are much more likely to respond to it.
With a bit of luck our gleefully anticipated thumping at the polls in the mid-term elections will then remain a Democrat pipe-dream and the ACA will be amended as we’d like.
Maybe.