In a speech yesterday morning on the stalemate in Washington DC over the raising of his country's debt limit, US President Barack Obama said the Democrats and Republicans need to reach a compromise in the next three days so that the US can continue to pay its bills on time. These bills, said the American President, include pension cheques, benefits for veterans and the contracts the Government has signed with thousands of businesses. "Keep in mind," said Mr Obama, "if we don't come to an agreement, we could lose our country's AAA credit rating, not because we didn't have the capacity to pay our bills-we do-but because we didn't have an AAA political system to match our AAA credit rating." The point made by the US President about the country's political system not matching its credit rating does not only apply to the US system. It could also be said of T&T that our political system-by which is meant the ability to negotiate and implement policies that provide the maximum benefits to as many people as possible-does not match our credit rating.
The best current example of the inadequacy of the political system to adjust to the demands of a small, open, 21st century energy economy is the inability of the Government and the trade union movement to sit down and negotiate a wage increase for public workers that would be acceptable to the workers and would not place the country in economic jeopardy in the years ahead. It is clear that T&T is operating in a world in which volatility and uncertainty are at all-time highs. It is also evident that while the politicians and the trade unionists eyeball each other in the hope that the other blinks first, they both need to keep their eyes open to what is happening in the US and in Europe. What we need in T&T is, in effect, a third eye. That third eye would indicate to us the importance of the statistics released in the US yesterday, which indicated that the country's economic growth in the January to March quarter was revised downwards to 0.4 per cent and the initial estimates of economic growth in the April to June quarter was 1.3 per cent.
In other words, while the US economy is slowing to a standstill, the country's politicians are engaging in a suicidal game of political brinkmanship over whether the US should meet its fiscal targets purely on the basis of reducing social entitlement or whether part of the pain of adjustment that the US is being forced to undertake should come from higher taxes on those who can most afford to pay them. The US, therefore, faces twin threats: The possibility that its economy will run out of steam and slip into a recession and the devastatingly destabilising impact of the two parties in the US not being able to negotiate an agreement to raise the debt ceiling. Among the implications of there being no agreement some time next week would be a global rush away from the US dollar as the world's foreign reserve currency. The value of the US dollar would plunge, leaving T&T and scores of countries around the world holding US dollars that would be worth less next month than they were last month. A failure to agree on a new debt ceiling would also ensure that the US economy is plunged into a depression as, according to Mr Obama, "a lower credit rating would result potentially in a tax increase on everyone in the form of higher interest rates on their mortgages, their car loans, their credit cards. And that's inexcusable."
This notional tax increase for Americans would reduce their disposable income, which is likely to mean that they will be less able to buy the things that T&T produces. The old saying that if your neighbour's house is on fire, it is time to wet your own house applies to this situation. Such extreme uncertainty and potential volatility may require the T&T Government to postpone the deliberations on new collective agreements for public servants and other state sector workers until there is greater clarity in the international scenario. It would be tragic, indeed, if the Government were to be browbeaten into a collective agreement with the public sector unions which turns out not to be feasible because of developments completely outside our control.
