A must read for our neighbor
Globally high national debts are associated with higher interest rates and inflation along with many other things. Given that the rate of inflation is under five per cent and interest rates around three per cent in the US, one wonders why such a fuss has been created about the debt ceiling. On the contrary Pakistans rate of inflation is recognised at around seventeen per cent and official interest is over thirteen per cent but everyone seems to be complacent. It is like a riddle!
Apparently, the debt crisis in the US has come to a close due to Congress approving a reconciled version of the debt bill. It was an ideological struggle between the Republican and Democratic economic models, and renowned economists are calling it surrender by President Barrack Obama. Notwithstanding who is right and who is wrong, one thing is evident: the legislative bodies of the US have publicly debated the pros and cons of increasing the debt ceiling. In contrast, Pakistans debt crisis is much more serious but the Congress body has ignored the issue because of their ignorance or opportunism.
For people who do not understand the cause of debt crisis mess, I would like to explain it in as simple a language as possible. Following Bush, the Obama administration has been borrowing and spending more to lift the economy. However, the Republican Party conservatives portend that rising debts are destabilising and can diminish the nation on the international level. They do not want the Obama administration to borrow more and instead they wish to cut spending on programs for young, poor and old people. They also want to give tax cuts to the rich, preaching that if taxes are lowered for the top ten per cent wealth-holders they will save and invest, leading to lifting up of economy. This ideology represents the marriage between the rich of America and the right wing party, which was consummated decades ago.
On the contrary, Democrats argue that such an anticipated trickle-down effect of tax cuts for the wealthy will be counterproductive for the nation at this point. A New York Times columnist Paul Krugman, encapsulate this argument as The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Furthermore, young, poor and old are the base of the Democratic constituency and Democrats wouldnt wish to harm it publicly.
Contrary to propaganda, it has been a pattern in the US that when the Republicans control the US, the government debt balloons and Democratic Presidents have to clean up the mess. The government debt during Regan and first Bush era skyrocketed. President Bill Clinton dealt with it aptly and by the time he left, the US treasury had a huge surplus in its kitty. However the junior Bush burned it fast, giving tax cuts to the rich, starting two wars in Iraq and Afghanistan and spending trillions of dollars to save Wall Street and the banks, burying his nation under mountain of debt again. By the time President Barrack Obama, claiming to be a Regan disciple, took office- the economy was sinking but he continued the Bush policies by borrowing and spending.
Republicans, who never complained about rising debts during 8 years of the Bush era, started making noise about it, despite the fact that Obama was following the Bush strategy. The president also gave in to Republicans on extending the Bush tax cuts for the rich. However, his tinkering with the health care system and having given some rights to the homosexuals enraged the Republican Party. The Tea Party movement emerged to reassert extreme right wing agenda and many of their zealots were elected to the Congress, which was at the forefront of the debt crisis debate.
One can disagree about which model will best help the US, but a positive point is that elected individuals who dont agree on policies will still debate them publicly to determine which party and its affiliated economic agenda will be used. Contrary to the US, Pakistan has been accumulating mountains of debt without any visible means to pay it back, and yet the problem is not discussed in the legislative assemblies. This should be the major issue for peoples elected representatives but that is not the case. It shows immaturity, ignorance and indifference of the ruling elite towards the common citizens.
By December 2010 Pakistans domestic debt was 5,497.4 billion rupees and external borrowing and liabilities of 59.356 dollars or 5105 billion rupees. In total 10602 billion meaning each Pakistani owes Rs. 589,000. This means that even street beggars and daily wage earner are under so much debt which they can never be able to pay. In short, it seems a Herculean task for Pakistan where poverty levels are high, rate of industrialisation and hence getting employment is slow and population growth eats up any economic expansion which is hardly thereif the population and economy grow at 2.4 per cent rate each then it means 0 per cent growth because additional population will eat up the growth.
I am sure the critics would object as to why a superpower is being compared to a developing nation? Such comparisons are not made on the merit of money in the states coffers, or the number of jets and missiles they posses, but rather posses a fundamental question: if the national debt has been considered such a radical problem to the biggest super power, shouldnt a nation like Pakistan be concerned for its own well being. By the way, it is not a concern just in the US, China, India and all states would be concerned if they would be in Pakistans situation. If we want parity with India regarding nuclear weapons then why not mach it (India) on debt levels and governments implementation of Supreme Court decisions.
Dr Manzur Ejaz is a poet, author, a political commentator and a cultural activist. He is a Doctor of Economics and currently lives in Washington DC.
The US debt crisis and a Pakistani riddle | | DAWN.COM
Globally high national debts are associated with higher interest rates and inflation along with many other things. Given that the rate of inflation is under five per cent and interest rates around three per cent in the US, one wonders why such a fuss has been created about the debt ceiling. On the contrary Pakistans rate of inflation is recognised at around seventeen per cent and official interest is over thirteen per cent but everyone seems to be complacent. It is like a riddle!
Apparently, the debt crisis in the US has come to a close due to Congress approving a reconciled version of the debt bill. It was an ideological struggle between the Republican and Democratic economic models, and renowned economists are calling it surrender by President Barrack Obama. Notwithstanding who is right and who is wrong, one thing is evident: the legislative bodies of the US have publicly debated the pros and cons of increasing the debt ceiling. In contrast, Pakistans debt crisis is much more serious but the Congress body has ignored the issue because of their ignorance or opportunism.
For people who do not understand the cause of debt crisis mess, I would like to explain it in as simple a language as possible. Following Bush, the Obama administration has been borrowing and spending more to lift the economy. However, the Republican Party conservatives portend that rising debts are destabilising and can diminish the nation on the international level. They do not want the Obama administration to borrow more and instead they wish to cut spending on programs for young, poor and old people. They also want to give tax cuts to the rich, preaching that if taxes are lowered for the top ten per cent wealth-holders they will save and invest, leading to lifting up of economy. This ideology represents the marriage between the rich of America and the right wing party, which was consummated decades ago.
On the contrary, Democrats argue that such an anticipated trickle-down effect of tax cuts for the wealthy will be counterproductive for the nation at this point. A New York Times columnist Paul Krugman, encapsulate this argument as The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Furthermore, young, poor and old are the base of the Democratic constituency and Democrats wouldnt wish to harm it publicly.
Contrary to propaganda, it has been a pattern in the US that when the Republicans control the US, the government debt balloons and Democratic Presidents have to clean up the mess. The government debt during Regan and first Bush era skyrocketed. President Bill Clinton dealt with it aptly and by the time he left, the US treasury had a huge surplus in its kitty. However the junior Bush burned it fast, giving tax cuts to the rich, starting two wars in Iraq and Afghanistan and spending trillions of dollars to save Wall Street and the banks, burying his nation under mountain of debt again. By the time President Barrack Obama, claiming to be a Regan disciple, took office- the economy was sinking but he continued the Bush policies by borrowing and spending.
Republicans, who never complained about rising debts during 8 years of the Bush era, started making noise about it, despite the fact that Obama was following the Bush strategy. The president also gave in to Republicans on extending the Bush tax cuts for the rich. However, his tinkering with the health care system and having given some rights to the homosexuals enraged the Republican Party. The Tea Party movement emerged to reassert extreme right wing agenda and many of their zealots were elected to the Congress, which was at the forefront of the debt crisis debate.
One can disagree about which model will best help the US, but a positive point is that elected individuals who dont agree on policies will still debate them publicly to determine which party and its affiliated economic agenda will be used. Contrary to the US, Pakistan has been accumulating mountains of debt without any visible means to pay it back, and yet the problem is not discussed in the legislative assemblies. This should be the major issue for peoples elected representatives but that is not the case. It shows immaturity, ignorance and indifference of the ruling elite towards the common citizens.
By December 2010 Pakistans domestic debt was 5,497.4 billion rupees and external borrowing and liabilities of 59.356 dollars or 5105 billion rupees. In total 10602 billion meaning each Pakistani owes Rs. 589,000. This means that even street beggars and daily wage earner are under so much debt which they can never be able to pay. In short, it seems a Herculean task for Pakistan where poverty levels are high, rate of industrialisation and hence getting employment is slow and population growth eats up any economic expansion which is hardly thereif the population and economy grow at 2.4 per cent rate each then it means 0 per cent growth because additional population will eat up the growth.
I am sure the critics would object as to why a superpower is being compared to a developing nation? Such comparisons are not made on the merit of money in the states coffers, or the number of jets and missiles they posses, but rather posses a fundamental question: if the national debt has been considered such a radical problem to the biggest super power, shouldnt a nation like Pakistan be concerned for its own well being. By the way, it is not a concern just in the US, China, India and all states would be concerned if they would be in Pakistans situation. If we want parity with India regarding nuclear weapons then why not mach it (India) on debt levels and governments implementation of Supreme Court decisions.
Dr Manzur Ejaz is a poet, author, a political commentator and a cultural activist. He is a Doctor of Economics and currently lives in Washington DC.
The US debt crisis and a Pakistani riddle | | DAWN.COM
