Korean politics has recently been in turmoil over scandals such as the arrest and indictment of a member of the National Assembly; Lee Seok-ki, on charges of plotting treason and the resignation of Prosecutor General Chae Dong-wook due to an allegation of having a son out of wedlock. Now the NLL issue is making noise once again. But these issues are not as serious as the problem that is currently occurring in U.S. politics.
The Federal Reserve, the central bank of the United States, had boasted all summer that the U.S. economy was recovering rapidly. But Ben Bernanke, the chairman of the Federal Reserve Board, surprised the world’s financial market on the day before Chuseok with his announcement that the Federal Reserve would have to continue the current policy by continually purchasing government bonds to ease the money market at least until next year. His reason for the continuation of the policy was that the U.S. economy, despite its marginal improvement, was still in a stage that might still turn for the worse.
The major points of Bernanke’s press conference were that the Federal Reserve “has been too optimistic” about the U.S. economy and that it would continue bond buying activity, “until we can be comfortable that the economy is in fact growing the way that we want it to be growing.” It means that the Federal Reserve will continue to keep interest rates low and increase money flow by purchasing assets in order to boost the housing market and job creation. This tells us that the current outlook of the U.S. economy is not as good as the Federal Reserve boasted during the summer after all.
Bernanke said last year that the Federal Reserve would cut back its bond-buying if the unemployment rate fell to 7 percent (currently 7.3 percent) and that it would pull back its low-interest-rate policy if the unemployment rate fell below 6.5 percent. But in this press conference, he refused to comment on the plan. Rather the Federal Reserve lowered its forecast of economic growth from 3.5 percent to 3 percent.
Why did Bernanke make this gloomy prediction about the U.S. economy? He did so because of a political fight in the U.S. It is a fierce battle between the Republican Party and the Democratic Party, in the middle of which is President Obama. House Republicans, majority party, are trying to practically nullify ”Obamacare’’ by eliminating the funding for the implementation of Obamacare for next year’s budget. They tried to add provisions to defund Obamacare or to postpone its implementation for another year in their 2014 budget bill. Democrats in the Senate, which is dominated by Democrats, opposed this attempt, and without House Republicans moving the government will be shut down.
On Sept. 20, the House passed a short-term spending plan. The key point of the plan was to continue the current budget until December while removing the funding for Obamacare. This plan, which also contained sequestration measures to reduce the federal deficit, was passed by 230 to 189.
Since the U.S. Congress has a bicameral system, of course, this was not the end of the process. The bill went right away to the Senate where the Democratic majority said they would surely keep Obamacare intact to expand healthcare for Americans, but some Republican senators said that they would filibuster a vote on the House budget plan. President Obama said that he would veto any budget bill that would defund Obamacare, and House Republicans responded that they would shut down the government. Due to Republican Senators who opposed a government shutdown, the filibuster attempt failed. The Senate voted down the House bill and sent it back to the House the next day. In the end, this conflict led to the worst result, a government shutdown because of the budget disagreement.
There was a similar case during the Democratic Clinton administration, when I was in the House. At that time, the Republican Party also held a majority in the House and Senate and a political conflict between the Republican Party with Gingrich as the House Speaker and the Democratic Party with Clinton as the President shut down the government for25 days. After the shutdown, the mid-election came and the Republican Party lost five seats. As a result, Gingrich decided to resign as House Speaker.
The current situation is more complicated than the previous shutdown. According to a recent poll, almost 70 percent of Americans strongly oppose the government shutdown and severely criticize the Republican Party that supports the shutdown, but almost 70 percent of them also oppose Obamacare. Republicans chose the brinkmanship of shutting down the government as the only way to change Obamacare, but it is a dilemma for them that 70 percent of Americans oppose the government shutdown while 70 percent of Americans also oppose Obamacare. Furthermore, Congress has to raise the debt ceiling by Oct. 17. This is a real crisis, since failing to do so would make the U.S. government default on its debts.
In U.S. history, there has never been a government default. I think that President Obama should concede to a certain degree. Shouldn’t he allow the cornered Republicans to save face a little this time?
Jay Kim is a former U.S. congressman. He serves as chairman of the Kim Chang Joon U.S.-Korea Foundation. For more information, visit Kim’s website at http://www.jayckim.com.