Triple A

Early yesterday (Sunday night Washington time), President Barack Obama announced that a framework for a deal was reached among the leaders of the US Congress. Presumably, a compromise bill will quickly pass both houses of the US Congress and signed by Obama in record time to avert an unprecedented default.

This deal to raise the US debt limit was forged almost literally on the 11th hour. It was forged through weeks of interminable negotiations and round-the-clock staff work.

The negotiations kept the world’s financial markets on edge. A US default was unthinkable but, until a compromise was reached, entirely possible. While American politicians wrangled, a new episode of volatility descended on the global markets. The dollar slipped dramatically against all traded currencies and the New York stock exchange fell ominously.

Even if the debt limit is raised, the damage to the dollar’s credibility is done. While the US will likely retain its enviable Triple A credit rating, a large cloud of doubt now hovers over America’s capacity to manage its financial affairs. The elements of the deal forged yesterday, a mix of spending cuts and the plugging of tax loopholes, will be studied thoroughly for clues about the fate of world’s largest economy and, consequently on all of us.

A cap on government borrowing is nothing new. It was first imposed in 1917, setting a borrowing limit of $11.5 billion on Washington. It has been routinely adjusted nearly every year since then, without much ado, until the last ceiling of $14.3 trillion was reached.

Things, however, changed dramatically over the recent months. The outstanding US public debt nearly equals the country’s GDP. Government’s ability, even willingness, to rein in the public sector deficit has been glaringly wanting.

The biggest factor explaining this near brush with financial disaster has been the emergence of a new force in American politics: the rise of a militant conservative trend referred to as the Tea Party movement. The movement is so named recalling the “Boston Tea Party” incident before the American revolution where objection to British taxation was expressed by dumping a cargo of tea into the sea.

The Tea Party movement demands an end to “big government” — a large public sector sustained by large taxation. This movement wants smaller government and more tax relief. This movement constitutes the hardline opinion within the Republican Party.

In the last elections, Tea Party affiliates won numerous seats in the US Congress, estimated at about a fourth of seats held by Republicans. With that number, they were able to exert pressure on the Republican leadership.

Tea Party members are an ideological lot. They pursued their political agenda in a pig-headed way, unmindful of the realities at hand. They simply want government spending cut and taxes eventually reduced, impractical as that might be.

It was principally the activism of the Tea Party that made the debt limit such a big issue this year. They simply refused to raise the borrowing limit if this meant any increase in taxes. They wanted government to cut spending drastically without recourse to new revenues. To keep within the debt limit, however, the US government will have to cut spending in a manner that will result in economic dislocation.

The political assertiveness of the Tea Party is not a passing phenomenon. It is something the US political system will have to deal with in the years to come, producing many more instances like this one where impractical policies will have to be adopted to accommodate a strident ideological group that has broken into the power circle.

That distinct ideological/attitudinal virus worries Obama. He has said that to maintain America’s Triple A rating, it needs to rebuild a Triple A political system: one that is able to govern realities rather than entertain ideological delusions.

That sharp disparity between the quality of the economy and the quality of the political system is something we should worry about as well.

Ad Congress

Two years ago, the biennial Advertising Congress was scheduled for Baguio City. Weeks before the Congress date, however, Typhoon Pepeng wrought devastation on Northern Luzon, causing landslides all around the City of Pines. At the last moment, with the roads to Baguio cut off, the Ad Congress had to be moved to Subic.

This year, the 22nd Ad Congress is scheduled for CamSur. This time, Typhoon Frank flooded 22 towns in that otherwise emerging province. Some quip that the Ad Congress is a harbinger of bad luck.

There is no serious move, however, to relocate this giant event elsewhere. The organizers are confident that the province will quickly bounce back and be ready for the giant event calendared for November this year.

The provincial government assures the organizers of the Ad Congress that their facilities will be fit and ready to host the event. There is little reason to doubt their assurance. There is enough energy and capacity there to make the suitable preparations.

If there has been some progress in our tourism, it is largely due to CamSur. Last year, the province drew 1,879,172 tourists, thrice Boracay’s draw of 607,537. That once backwater province now surpasses the tourism draw of Manila and Cebu.

Tourism lifted CamSur from poverty, climbing up from 39th place to 10th in income in less than a decade. More impressively, it has jumped to 3rd in life expectancy after La Union and Bulacan. It is now top-ranked in rice production and revenues generated from economic enterprise. We will see that in November.