Disputes Over US Federal Debt Ceiling

After days of stalemate and tension, the US Democratic and Republican parties finally reached an agreement on the US federal debt ceiling. This was to the relief of global stock markets, and global investors. The pressure, as heavy as a thousand-ton stone, was simultaneously removed from everybody’s chest.
Earlier, the US Democratic and Republican parties did not want to come to a compromise over their respective proposal on how the US debt limit should be set. They refused to give in to each other and so in the end they could not reach an agreement. Their persistence in holding on to their respective proposal has even led to the situation whereby when the US House of Representatives passed the proposal it was bounced back by the US Senate. Such situation has gone back and forth for a number of times before the US Congress finally passed President Barack Obama’s debt limit ceiling at the very last minute when the deadline approaching.
Default Predicament
This kind of congressional result carried out in the US Capitol has given people a little suspense, but it was not too surprising to many. President Obama attributed the lifting of the US debt credit default crisis to the e-mail and telephone ‘bombardment’ that the US citizens have given to their congressional representatives. But in fact, we believe both Democratic and the Republican lawmakers then were pretty aware of the fact that if the Congress could not reach a compromise on the US debt limit ceiling, none of them could afford to bear the severe consequences of a US debt default predicament.
US Treasury Secretary Timothy Geithner did say that the consequence of US debt default is very serious. The level of such a threat is far greater than the impact of the Lehman Brothers bankruptcy. As such, investors from all over the world were all holding their breath to wait for the result of the Congress decision on the US debt default crisis. They were all afraid that the US debt default could lead to the collapse of the global economy. To many people, the vivid memories of the devastated stock market triggered by the Lehman Brothers bad debts remain until today.
Bipartisan Confrontation
The truth behind the stiff noises between the two US political parties over the US debt limit ceiling has everything to do with the US presidential election to be held in 2012. Whether it is the Republican or the Democratic Party, their respective debt limit ceiling proposal was one of the ways for them to fight for favorable public opinion. To the American people who have long suffered the economic downturn, the respective proposal by the two parties was aimed to add extra points for them. Of course, these US congressional representatives also understood the consequence of what would happen to the nation if they could not reached a compromise in settling the US federal debt crisis. Yet they have chosen the approach to, besides standing firm on their respective ground, also hoped that they could have more opportunities to gain additional political capital before the final passing of the US debt ceiling resolution.
This round of political battle between the Democratic and Republican Party has also highlighted the bipartisan confrontation between the two parties in the US Congress. The last time when more than a few hundred US congressional representatives fought until midnight to allow the US Patriot Act to pass through was when US President Obama was overseas. In the end, President Obama had to sign the bill using his automatic pen. This action taken by President Obama has even led Obama faced with the legal question of whether the US President had indeed violated the US Constitution rule.
Spreading Economic Disaster
For sure, the political battle staged by US politicians over the US debt crisis has carried it a bit too far this time. US politicians have used global economy as their dice in their gambling game. The result is that the world economy can be at stake fearing not only accidental misfires by the US politicians but also the repeat of a new wave of global market crash amid the possible consequence that the US Government might lose its credit standing in the international community.
When this happens again in the future, we can only say that the US politicians are indeed ‘played out the fire’ spreading economic disaster to the international community.

Obama Fulfills Historic Dream With Passing of Health Care Reform Bill

The US Congress finally passed the Health Care Reform Bill that will cost the government close to $1 trillion. This is a major US medical reform bill passed in the past 100 years of US history. The passing of the bill fulfilled President Obama's election promise to the people. In 2009, when US President Barack Obama took office, he pledged to the people that he "must tame this health care insurance monster."

Historic Step
In fact, to reform national health care insurance plan has become one of the hottest topics in the US politics in recent years. However at the time when the US Congress passed this historic health care reform bill to provide medical care for all US citizens, other countries such as Germany and France have instead passed their respective "saving and unity" acts to cut social welfare expenditures in response to the plight of financial and economic downturn.

The respective cut in social welfare and unemployment allowance fund by Germany and France was as high as $20 billion respectively. It was also the second time since the Second World War that these two European nations have cut their social welfare funds to their citizens. Coincidentally, earlier this year, South Korea has also released a document entitled "Affordable health insurance white paper." This white called on the people to reduce dependence on social welfare.

Political Gimmick
The experience of the United States, Germany, France, Korea and other countries in dealing with social welfare and medical care issues is a good reminder for Malaysia's ruling and opposition parties to stop those political gimmick and competition of "cashing out social welfare checks for votes" during general election campaign . It is important for Malaysia to use its limited financial resources to give priority to look after the truly unfortunate people and disadvantaged groups in the community first so that the well being of all citizens can be safeguarded.

Along with economic development, when a country's national income increases, the government must in due course gradually offer various social welfare measures to strengthen the care for the vulnerable groups in order to achieve the social fairness and justice ideals. But social welfare plan is by no means a free lunch. Once implemented, it is difficult for a country to amend or cancel. As such the implementation of it must be cautious. As the government itself is non-productive, every single dollar the government spends will finally have to come from tax payers' pockets. For this reason alone, when a government makes plans for social welfare or health care improvement, it must carefully plan them within its financial means.

Distribution of Social Welfare Fund
Malaysia's social welfare budget is on the lower side as compared with other countries and Malaysia also has the phenomenon of operating an uneven distribution of social welfare fund. It is time for Malaysia to make adjustment to its current social welfare system. However, according to Malaysia's current reality, if the government wants to implement any social welfare measure, it cannot take a universal and parallel approach; otherwise, Malaysia might repeat some of the mistakes made by some other countries.

When a country implements social welfare and health care plan without looking into the actual financial situation of the nation, such social welfare or health care promise cannot be effectively carried out. It is only good to look at but cannot satisfy actual need. Moreover, if this country tries to force this social welfare package through under acute financial shortage, such measure might even lead to financial bankrupt, Future generation of the country will also suffer eventually.

In general, social welfare can be divided into social assistance and social insurance. Social assistance is to help the socially disadvantaged groups to maintain a minimum standard of living with human dignity. The expenditure of it is generally absorbed by the government through the existing tax revenue. On the other hand, social insurance is a collective effort taken by the government and the people collectively in coming out with a plan to reduce human emergency and risk in time of need. The principle in maintaining such a social insurance plan is based on self-supporting and contribution of fund from the government people.

In case of Malaysia, the premium and coverage of social insurance plan accorded to people are low. In time of need the insufficient insurance fund coverage will have to come out from the Government's social assistance fund. If Malaysian Government continues to come out with such new social welfare measure, it will have a lasting impact to the government's financial soundness status.

Government's Commitment
In recent years, under pressure from the Parliament, Malaysian Government has adopted a number of tax cuts, coupled with the economic downturn, the federal budget has shown significant imbalance in revenue and expenditure. With the government expenditure continues to expand, the federal financial situation is deteriorating rapidly with government debt now amounting to $336 billion ringgit. This federal debt has reached 7.4 percent of Gross Domestic Product (GDP). This is the highest percentage in the past 20 years.

Since the social welfare budget is the Government's recurrent expenditure, and therefore Malaysian Government's federal budget for next year is also not very promising. Next year, the government's commitment to expand social allowance and disability allowance to the low-income elderly will require a budget of about $1 billion ringgit to support.

Efforts to Carry Out Plan
However, the government's effort to carry out prudent spending through levying taxes on consumer goods and to reduce fuel subsidies has not produced good result.

Although there is a need for the government to impose the reasonable Goods and Services Tax, but as it stands now, it will be difficult for this Goods and Services Tax to get through the Parliament now. In the end, all kinds of policy promises that the government intends to implement will have to be reduced or even let go. Such situation will further lead to more disputes by the society.