NEWS that an agreement has been reached ending the current budget impasse in the United States would please as many as it would amuse.
That a government can actually go into a shut-down or closure is a mystery that many on our shores would never understand.
That an elected Parliament can openly defy an elected President is the kind of thing that never happens in these pot hole-scarred territories of ours. What? Defy the President!!? I can see black boots from Bradley Barracks ready to march against the “imperialist sell-outs” and totemless miscreants from that cramped colonial chamber at 82 Nelson Mandela Avenue (not to be confused with 44 Nelson Mandela Avenue).
I can see MPs like Honourable Amos Chibaya or Nyasha Chikwinya or Joseph Chinotimba being off-loaded – like bags of potatoes on the back of a huge green truck – to a howling Chikurubi. I suspect Comrade Chinotimba and his unique beard would make quite a sight dangling from one of the prison cages that has been half the home of Last Maingehama and Morgan Komichi for the last several months.
I can see pork-faced MPs and their ill-dressed spouses lined up in Court A at the Harare High Court answering treason charges for defying the authority of the land. In earlier days, they would have just disappeared and their remains found at a farm in Goromonzi, arms cut to small sleeve and a wire running through them, inserted via the knowledge acquired from the Intarahamwe torture school.
But back to the puzzling issue of the American budget crises. What is at play here is that in all most all countries, including Zimbabwe, Parliament has the sole say over the Consolidated Revenue Fund or the fiscus. Put in simple terms, the people – through their elected representatives, the Members of Parliament – decide what to do with their own money, the taxes that they pay to the State. So far so good.
However, most countries of Westminster influence play lip service to the supremacy of Parliament in controlling the national pursue. In the case of Zimbabwe, the new Constitution in article 305 gives control of the Consolidated Fund to Parliament. But that control is not absolute.
In Article 305 (5) it allows the Minister of Finance to present a supplementary Budget before parliament for approval. There is nothing in the Constitution that prevents the concept of eat-now-without-authority and then seek retrospective approval from parliament. In fact legality for condonation for any unapproved expenditure is provided for by article 307(2).Advertisement
More importantly, the President in terms of article 306 may authorise withdrawals from the consolidated fund to meet any unforeseen expenditure provided that such withdrawal is not more than one and one half percent of the previous principle budget.
These provisions are virtually found in every Westminster Constitution and in fact are carried over from the original Lancaster House Constitution. On the other hand, the American Constitution has the absolute position where Congress only can appropriate and Congress only has the power to borrow for and on behalf of the Government. This is so in terms of Article 1, Section 8 of the American Constitution.
What this means then is that if whatever has been appropriated by Congress for use by Government runs out, that’s it, the Government must shut down. In fact the Constitution itself is clear that workers must go home, so there is nothing like voluntary service.
These Government shut downs are not new to the American economy. Between 1976 and now there have in fact been 18 shut downs. The 1995-1996 shut down under Clinton was in fact the longest, lasting for 27 days.
Bar the Federal Government, States have also shut down, for similar reasons – New Jersey in 2006 and Minnesota in 2011.
So the shut down per se, whilst of great inconvenience to workers and their families, is something that can happen and is something whose consequences can well be contained. After all, it is in reality a partial Government shut down. Besides, just like the current one, public opinion, a vicious press, and public pressure will not allow the crises to get out of hand.
At the core of the present impasse has been the immediate linkage of President Barack Obama’s health reform programme, known as Obamacare, which has seen Republicans, particularly the right wing tea-drink version of the same, viciously oppose the same.
When budget time came, they essentially tried to use the budget as a way of holding the President to ransom by insisting on certain fundamental changes to Obamacare before the same could be passed. Where I come from it is called gutter politics.
The truth of the matter however is that America has never been the same since President Obama was elected, and this group of people called tea party Republicans have crawled like slime from their red neck neighbourhoods to virtually and irrationally oppose everything that the President does or proposes.
American politics thus stands on a tether: where to from here, given the misdirected zeal of this tea tribe against the rising anger of many Americans who traditionally have always located themselves in the centre?
The debt default is another cup of tea. As stated before, Congress has the right to borrow. However, through an Act of Congress, the Second Liberty Bond of 1979, later on the Public Debts Acts of 1939 and 1941, Congress set limits or a ceiling on the amount of money that the Government can borrow.
So here is how it functions. Congress approves a budget. Separately a debt ceiling is also set, the budget is dealing with internal resources, the ceiling is dealing with external debt contraction to cover expenditure not covered by the budget.
When the debt ceiling has been reached, the President seeks retention of the status quo, a roll over or raise on the debt ceiling. The aspect of raising debt ceilings is again not new. In fact it is routine. President Reagan alone raised it 19 times, and between 1940 and now it has been raised 55 times.
So what is the deal? The issue is that America has really become a debtor nation, the world’s biggest borrower living way beyond its means. It is therefore understandable the call by sane Republicans and some Democrats that America must retrench expenditure, reduce its debt and live within its means.
American debt of around $16 trillion is, at 75% of GDP, well within Third World territory and of that 47% is held in bonds by foreigners – China, Japan Brazil Taiwan, the UK, Switzerland and Russia being the top creditors. China and Japan alone are holding over a trillion dollars each of these bonds.
Naturally, the consequences of a default would have affected the international finance system, given the global spread of US debt. More importantly it would shake the foundation of the modern credit and monetary system based on the unwritten sacrosanctity of the US-backed monetary system. No wonder many, including the Chinese, are calling for a reform of the same.
In the short term, little countries like Zimbabwe would be less affected but the nature of international finance capital, particularly in the context of the continuing global depression is that we would feel the effects, sooner rather than later.
The real worry for anyone in the Third World is the meaning of the US reversing its position as it did from being a net lender to a net borrower. A position that started in the late years of the Carter Presidency and consolidated under President Reagan.
The thing is the US, by coming a net borrower started competing worldwide for the same resources that India or little Zimbabwe needs thereby pushing up interest rates. The reversal has had a drastic effect on developmental paths of many nations. The old master Giovanni Arrighi 2002, put it more dramatically than I could: “It (the reversal) is likely that this was the single most important determinant of the contemporaneous reversal in the economic fortunes of North America, and of the bifurcation in the economic fortunes of Third World regions.
“For the redirection of capital flows to the United States reflated both effective demand and investment in North America, while deflating it in the rest of the world… at the same time enabling the United States to run large deficits in the balance of trade…”
So in fact the world has suffered the real cost of the American debt crises. But for some of us who struggled with little debts of $11 billion dollars it never ceased to amaze us how different sets of rules applied to different countries. It always appeared that the less you owed, the more dangerous you were and the more mistreated you were.
That I guess is the ugly reality of this world.
Tendai Biti was Zimbabwe’s Finance Minister between February 2009 and August 2013