SANTIAGO - The most urgent problem for the second term of President Barack Obama or the first term of President Mitt Romney will be a problem that neither of them created. We are talking about the cryptically dubbed ‘fiscal cliff,’ which, if it is not solved, will push the United States into another recession in 2013.
It is a budgetary problem. Last year, the White House proposed increasing the debt ceiling to finance spending, and Congress rejected the proposal. The Republican majority opposed increasing the debt ceiling and also opposed increasing taxes. The only option they would accept was to reduce government spending, while the President and Democrats in Congress tried to push through stimulus programs that increased spending.
Faced with the impasse, Congress named a bipartisan super-committee to find a solution. But if the so-called super-committee does not come up with one, in January 2013 automatic tax increases and cuts in public spending will kick in.
The fiscal cliff would include both the expiration of the Bush tax cuts and the end of cuts to employers' taxes, put in place by Obama. It would also mean the end of unemployment insurance and drastic cuts in public spending for defense, healthcare and other government sectors, for a total of $100 billion in cuts per year. According to the Congressional Budget Office, that would prompt a 1.3 percent contraction in the US economy next year.
With most of Europe in recession, Japan stagnated, China slowing down and the US still shaky, a new US recession could have wide-reaching and unpredictable consequences for the global economy. There is no question that the strong numbers in Latin American economies will cool. In this scenario, there would be a real possibility of a global depression, just as we nearly experienced four years ago.
If Obama is reelected, he will probably decide to let the Bush tax cuts expire, but he will also have to make drastic spending cuts if he wants any possibility of support from a congress that will continue to be in Republican hands.
If Romney wins, he will probably have more liberty, since he will have a Republican congress. He will probably make the Bush tax cuts permanent, at the same time that he pursues a drastic program of cuts on everything except defense. And he will try to kill Obamacare.
In either case, one has to note the discouraging level of discourse in Washington. The fiscal cliff is the best example of how Republicans and Democrats cannot agree on running the country. They are operating in exactly the style of Latin American countries.
This legislative polarization has been reflected in the presidential campaign, and in the opinions of the supporters of both candidates. The dialogue has drifted towards insults, and in some cases, lies.
The candidates themselves have not behaved much better - one accusing the other of being a socialist, the other retorting that his opponent is a capitalist bloodsucker.
But the economy and business are only one component of the global village. Obama is much more popular than Romney around the world and he is a much more viable negotiator, politically and economically, in Asia, Africa and the Middle East.
Obama offers stability and a United States that is more democratic and encourages dialogue. Romney symbolizes the imperial eagle. After considering the issues at stake, America Economia has decided to support Barack Obama.
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