The US and the Buildup of World Crises: Fiscal Reasons
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Doctor of Economics, Senior Research Fellow at the Institute for US and Canadian Studies at the Russian Academy of Sciences
The relationship between the domestic and foreign policies of the US is one of the key topics in modern American political studies. In the past, the US often resorted to foreign policy as a way out of domestic crises by using or threatening to use its military power. Is there any such correlation in the context of the severe budget crisis that the US has faced since 2009?
The relationship between the domestic and foreign policies of the US is one of the key topics in modern American political studies. In the past, the US often resorted to foreign policy as a way out of domestic crises by using or threatening to use its military power. Is there any such correlation in the context of the severe budget crisis that the US has faced since 2009?
The year 2013 witnessed two short-lived international crises which emerged unexpectedly and exited the center of the world’s attention as quickly as they appeared. Many observers had predicted their rapid evolution into confrontational showdowns between the world leading nations and key centres of power, even potentially involving the use of weapons of mass destruction (WMD). The first one was the crisis around the Korean Peninsula, which reached its height between March and May 2013. The other one was Syria, where the active phase continued from early August until mid-September 2013. In both cases, the main escalating force behind the conflicts was the United States, which mobilized all of its informational, as well as political and military, resources to widen the scope of the crisis. In both cases, having reached the ultimate “line of tension” where the tangible threat of the use of military force by the Americans started to become real, the US political leadership and, first and foremost US President Barack Obama, were quick to “phase down” the conflict situation with their statements of a serious threat to international security emanating from the North Korean nuclear programme or the use of chemical weapons in Syria.
Throughout March, the Pentagon effectively waged war on two fronts: it expanded the US military presence on the Korean Peninsula, on the one hand, and “bombarded” US Congress and the American media with brief press releases alleging catastrophic implications from defence sequestration on the combat readiness of the US Armed Forces.
A comparative analysis between key phases of the Korean and Syrian crises and the situation evolving in Washington throughout 2013 around the key issues of today’s US domestic policies – the federal budget deficit and spiraling federal government debt – suggests a certain correlation and causal links between the foreign and domestic political crises that the US was facing. This was especially made apparent by the growing tensions in Syria and the budget crisis that stunned Washington during the first two weeks of October. In other words, it looks as if the Obama administration was deliberately instigating international crises in an attempt to use them to address the “fiscal issues nexus” that Washington faced during the spring and autumn of 2013.
Conflict over the North Korean Nuclear Programme as the Frontline of Opposition to Budget Sequestration
North Korea nuclear test, 2013
The Obama administration took advantage of the fact that on 12 February 2013 North Korea conducted a test of a 6-9 kiloton nuclear device, leading to widespread condemnation by the world community, including the UN. In its special statement, the White House noted that “North Korea’s nuclear weapons and ballistic missile programs constitute a threat to U.S. national security and to international peace and security” and that the US therefore will “take steps necessary to defend ourselves and our allies” [1].
The administration’s strategy must have been inspired by two parallel processes in need of a prompt reaction by Washington. In the first case, this happened at the global political level, so between 1 March and 30 April 2013, what followed was a joint US-South Korean military exercise, a regular feature since 1997. The exercise involved 800,000 South Korean and 10,000 US troops [2]. It was exactly during the two months of the exercise that the confrontation between North Korea, on the one hand, and South Korea and the US, on the other, further worsened. The key element of the US strategy during the military exercise was to build a ‘nuclear umbrella’ over South Korea and adjacent territories, including Japan.
By 1 March 2013, the budget crisis in Washington had deteriorated further. There were three underpinning reasons. First, budget sequestration procedures kicked in on 1 March in accordance with the Budget Control Act of 2011 which required that budget expenditures until the end of 2013 fiscal year, ending on 30 September, had to be cut by USD 85 bln. Throughout March, the Pentagon effectively waged war on two fronts: it expanded the US military presence on the Korean Peninsula, on the one hand, and “bombarded” US Congress and the American media with brief press releases alleging catastrophic implications from defence sequestration on the combat readiness of the US Armed Forces. Set out below is a short timeline of the Pentagon’s military campaigning on “two fronts”:
| US Foreign Policy | US Domestic Policy | |
|---|---|---|
| 15-16 March: US Secretary of Defense Charles Hagel announced plans to revisit the US missile program with the view to increasing the number of interceptor missiles deployed in Alaska and at Vanderberg Air Force Base, California by 50 per cent, from 30 to 44 delivery vehicles, to counter “growing threats from North Korea and Iran”. | 1 March: At a press conference, US Secretary of Defense Charles Hagel claimed that the USD 47 bln. defense cut “puts at risk our ability to effectively fulfil all of our missions” [3]. | |
| 18 March: A Pentagon official admitted that B-52 strategic bombers carrying nuclear weapons did in fact fly over South Korea in March from the air force base in Guam. The fact of the overfly was recognized for the first time since the Cold War, although such flights had been performed before during joint US-South Korean exercises. | 12 March: At US Congressional hearings, General Robert Kehler, Commander of the US Strategic Command, noted that “fiscal uncertainty and declining resources” could negatively affect US readiness to respond to future crisis situations, in particular in the Korean Peninsula [4]. | |
| In late March, the US intensified its presence in the sky over South Korea, with B-52 strategic bombers flying over on 26 March together with two B-2 stealth strategic bombers from air force base in Missouri: the bombers performed bombing practice over the peninsula on 28 March. | 12 March: US Department of Defence comptroller Robert F. Hale stated that the nearly USD 41 bln cut went into effect on 1 March, translating into a 9 per cent cut in expenditures for each of the Pentagon’s structural units [5]. |
Secondly, later in March 2013, US Congress was expected to pass a resolution on federal government funding through to the end of 2013. The reason was that between 1 October 2012 and 27 March 2013, the federal government was funded on a temporary basis, pursuant to a resolution adopted by the US Congress and signed by President Barack Obama on 28 September 2012. A failure to approve the resolution this time, because of opposition from Republicans in Congress, was threatening to “wind up the government”. However, because the international situation around the Korean Peninsula had seriously become tense, debates on the resolution went rather smoothly and without much in the way of political complications. The relevant bill was introduced to the House on 4 March, approved on 6 March, and submitted to the Senate, where it was endorsed on 20 March and tabled for the Presidential signature on 22 March. On 26 March, President Obama signed the Consolidated and Further Continuing Appropriations Act through to the end of the 2013 fiscal year (P.L. 113-6). Significantly, as early as 27 March, the Pentagon’s official spokesman announced that the act signed the day before by the president would allow defense sequestration to be reduced by USD 10.4 bln till the end of the 2013 fiscal year [6].
Apparently, even as early as in April, the White House was clear in its mind that by May, the US would no longer be facing the risk of default under the federal government debt obligations. Quite instructive is the fact that from mid-April the US started to curtail gradually its efforts to whip up tensions in the Korean Peninsula, and by May, the Korean conflict vanished, unnoticed, from the front pages of the world media.
Thirdly, the issue of the US government debt ceiling promised to become a most severe budget problem in the spring of 2013. On 4 February 2013, President Barack Obama signed the No Budget, No Pay Act (P.L. 113-3), introducing a moratorium on increasing federal government debt until 18 May. Under the act, the US Treasury was to fix the US debt as of 19 May and, based on that amount, had either to finance federal government from its reserve funds, or, failing any further moves by US Congress to raise the debt ceiling, and announce default. On 20 May, the US Secretary of the Treasury, Jack Lew, informed Congress leaders that from 20 May, the US Treasury would be financing federal government from reserve funds, allowing it to function in the usual manner until 2 August [7].
Apparently, even as early as in April, the White House was clear in its mind that by May, the US would no longer be facing the risk of default under the federal government debt obligations. Quite instructive is the fact that from mid-April the US started to curtail gradually its efforts to whip up tensions in the Korean Peninsula, and by May, the Korean conflict vanished, unnoticed, from the front pages of the world media.
A Military Strike at Syria as a Way to Avoid Default
As the autumn was getting closer, US foreign policymakers considerably stepped up their activity involving Syria. Early in August, Congress virtually stopped doing any work on the 2014 federal budget. And since Congress was in recess from early August, it was also obvious that by 1 October the US may have had to start the 2014 fiscal year without the approved budget act, which would inevitably mean “shutting down the government”.
On 21 August 2013, the media for the first time published stories alleging that the Ghouta suburbs around Damascus in Syria had been struck with rockets containing a total of 350 litres of the nerve agent sarin. On 25 August 2013, there were further stories of a meeting that President Obama had at the White House with his national security advisers to discuss the situation in Syria following the 21 August chemical attacks. Following this meeting, US Secretary of Defence Charles Hagel ordered an increase in the deployment of the US Navy in the Eastern Mediterranean, announcing also that “President Obama has asked the Defense Department to prepare options for all contingencies.” [8]
On 26 August 2013, US Secretary of the Treasury Jack Lew informed Congress that by mid-October, the Treasury would have exhausted its reserve funds used to finance the federal government. Therefore, “Congress should act as soon as possible to meet its responsibility to the nation and to remove the threat of default. Under any circumstance - in light of its schedule, the inherent variability of cash flows, and the dire consequences of miscalculation - Congress must act before the middle of October.” [9]
As a result, by the end of the summer of 2013, the Obama administration could already have believed that the autumn budgetary crisis, which potentially could have caused the shutdown of the government and possibly a default over US debt obligations, had been resolved. It makes it easier to understand their decision to bring about a “man-made” crisis over the Syrian issue, using it to “aid and abet” efforts to eliminate (or cut to the bone) any costs involved in the yet another bipartisan budgetary battle.
It is therefore quite possible that throughout 2014, starting in the spring when the US will have, again, to confront raising the federal debt ceiling , the Obama administration may resort to instigating an “artificial” international crisis.
On 31 August 2013, President Obama made a statement on Syria laying all blame for chemical attacks on the Syrian government. Having described the Syrian chemical attacks as “a serious danger to our national security”, Barack Obama informed that the “United States should take military action against Syrian regime targets.” Excluding any option of an overland intervention, President Obama announced that the “action would be designed to be limited in duration and scope” [10]. He also made it known that although as the Supreme Commander he may order military action any time, he had nevertheless decided to ask Congress to authorize the use of military force.
On 3 September 2013, the US Senate Committee of Foreign Relations drafted a resolution allowing the US President to use military force to deliver strikes at Syria within 60 days, namely in September to October. In addition, already on 3 September, the White House solicited firm support for the use of force by the President from the leaders of both congressional parties. On 10 September 2013, in a special televised address to the nation on the Syrian issue, President Obama announced that he had asked US Congress to postpone the vote on armed strikes to be delivered at Syria while State Secretary John Kerry held diplomatic talks with the Russian Minister for Foreign Affairs, Sergei Lavrov, and looked for a diplomatic solution to Syria. The Syrian crisis could be well considered resolved, with diplomats taking over from the military.
In the absence of an international crisis in the background, a budgetary crisis looming in Washington became inevitable. Significantly, already on 17 September 2013, Director of the White House’s Office of Management and Budget Sylvia Burwell, in her special memorandum addressed to all federal departments and agencies, instructed them to draw up a plan of action in the event of “a potential lapse in appropriations” from 1 October 2014 [11]. On 1 October 2013, President Obama announced that he had begun shutting down government offices as a result of Republican opposition in Congress, which made it impossible to approve the 2014 budget. And while the budget crisis continued from 1 to 16 October 2013, on 17 October, federal departments and agencies were back to business as usual after Republicans agreed to the suspension of increases in the federal debt until 7 February 2014 [12].
The reason why the Obama administration decided, in the end, against using military force in the Syrian crisis is well known: apart from the additional defence costs running into hundreds of millions of dollars, the resolutions supporting military strikes against Syria had not gained the required majority of votes, either in the Senate or in the House. In addition, Gallop public opinion polls in early September 2013 showed that as of 11-12 September, 62 to 28 per cent of respondents were categorically opposed to using armed force against Syria [13]. The administration had to quickly switch over to a strategy that would allow them to fight Republicans in Congress, leading to a complete victory by the Democrats, although the situation pushed the national economy to a brink of technical default under the US government debt obligations.
2014 US Budget Situation and Forecasts
The ongoing confrontation over budgetary issues with Republican congressmen, which has been haunting Obama administration since the beginning of the second presidential term, has evolved into a fundamental malfunction of the entire budgetary process in Washington. The Republicans have been forever looking for windows of opportunity to try and win over public opinion. In the fall of 2013, they used the threat of government shutdown as leverage, combined with the menace of potential technical default under US government debt.
It is therefore quite possible that throughout 2014, starting in the spring when the US will have, again, to confront raising the federal debt ceiling , the Obama administration may resort to instigating an “artificial” international crisis (along the lines of the 2013 scenarios as above), striving to ensure the “unity” of political forces in Washington and avoid, under the shadows cast by an international crisis, yet another, politically very costly spiral of confrontation between Republicans and Democrats over budget issues. In particular, one may consider a letter of 22 January 2014 addressed to US Congress leaders by US Secretary of the Treasury Jack Lew where he informed them that, according to his agency, reserve funds would be exhausted by the end of February, and that the Treasury does not “foresee any reasonable scenario in which the extraordinary measures would last for an extended period of time” after 7 February [14].
References
1. The White House. Office of the Press Secretary. Statement by the President on North Korean announcement of nuclear test. February 12, 2013 // http://www.whitehouse.gov/the-press-office/2013/02/12/statement-president-north-korean-announcement-nuclear-test.
2. Key Resolve/Foal Eagle 2013 // http://www.globalsecurity.org/military/ops/key-resolve-foal-eagle-2013.htm.
3. U.S. Department of Defense. News. American Forces Press. Secretary Details Results of Sequestration Uncertainty. 03/01/2013 // http://www.defense.gov/News/NewsArticle.aspx?ID=119421.
4. U.S. Department of Defense. News. American Forces Press. Stratcom Chief: Fiscal Uncertainty Threatens Readiness. 03/12/2013 // http://www.defense.gov/News/NewsArticle.aspx?ID=119501.
5. U.S. Department of Defense. News. American Forces Press. Pentagon Comptroller Outlines Budgetary Challenges. 03/12/2013 // http://www.defense.gov/News/NewsArticle.aspx?ID=119508.
6. U.S. Department of Defense. News. American Forces Press. DOD Looks at Funding’s Effect on Personnel, Programs. 03/27/2013 // http://www.defense.gov/News/NewsArticle.aspx?ID=119635.
7. Letter from Jacob J. Lew, Secretary of the Treasury, to the Hon. John A. Boehner, Speaker of the House, May 20, 2013. // http://www.treasury.gov/initiatives/Documents/Debt%20Limit%20Letter%202%20Boehner%20May%2020%202013.pdf.
8. U.S. and U.K. Move Ships Closer to Syria. – USNI News, August 26, 2013 // http://news.usni.org/2013/08/26/u-s-and-u-k-move-ships-closer-to-syria.
9. Letter from Jacob J. Lew, Secretary of the Treasury, to the Hon. John A. Boehner, Speaker of the House. August 26, 2013 // http://www.treasury.gov/initiatives/Documents/082613%20Debt%20Limit%20Letter%20to%20Congress.pdf.
10. The White House. Office of the Press Secretary. Statement by the President on Syria. August 31, 2013 // http://www.whitehouse.gov/the-press-office/2013/08/31/statement-president-syria.
11. Executive Office of the President. Office of Management and Budget. Memorandum for the Heads of Executive Departments and Agencies. Planning for Agency Operations during a Potential Lapse in Appropriations.M-13-22, September 17, 2013 // http://www.whitehouse.gov/sites/default/files/omb/memoranda/2013/m-13-22.pdf.
12. PUBLIC LAW 113-46, The Continuing Appropriations Act, 2014. Public Law 113-46 makes continuing appropriations for the fiscal year ending September 30, 2014. P. H.R.2775−2, H.R.2775−10 // http://www.washingtonwatch.com/bills/show/113_PL_113-46.html.
13. GALLUP Politics. Americans Evenly Divided on Russia's Plan for Syria. As world deliberates, opposition to military strike mounts in U.S. September 13, 2013. − http://www.gallup.com/poll/164402/americans-evenly-divided-russia-plan-syria.aspx.
14. U.S. Department of Treasury. Secretary Lew Sends Debt Limit Letter To Congress. 1/22/2014. P. 1.− http://www.treasury.gov/connect/blog/Pages/012214-Lew-Debt-Limit-Letter-to-Congress.aspx.
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