Editor's Note: The following is reprinted with the permission of the Council on Foreign Relations.
With President Barack Obama and Republican congressional leaders locked in a stalemate over a deficit-reduction plan necessary to raise the nation's $14.29 trillion debt ceiling ahead of an August 2 deadline, two of the "Big Three" global credit rating agencies–Moody's and Standard and Poor's–said they were considering downgrading the United States (WSJ) from its top AAA status. Moody's cited the "rising possibility" that the U.S. debt limit will not be raised in time to avoid default.
The talks have been marked by clashes between Obama and Republican House Majority Leader Eric Cantor, who also sparred with fellow Republican, Senate Minority Leader Mitch McConnell. McConnell proposed authorizing the president (WashPost) to raise the debt limit without the requirement of prior spending cuts so that the United States does not miss any credit payments.
Federal Reserve Chairman Benjamin S. Bernanke warned of a "huge financial calamity" (NYT) on par with that of 2008 if the White House and Congress do not agree on a deal to raise the debt ceiling.
As the United States approaches the deadline to raise its debt limit, the White House and top lawmakers are attempting to set a course for the nation's long-term fiscal health. The talks have profound national security implications, as this CFR Issue Guide explains.
An agreement on raising the debt ceiling will not come from winning a spin war. If talks collapse, both sides will be blamed and whatever they're saying now won't matter much in the face of economic disaster. The only solution at this point is to bite the bullet and draft a deal everyone is unhappy with, writes TIME's Jay Newton-Small.
McConnell's plan is not bold, but it may be the most responsible way forward, says the Economist.
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MIDDLE EAST: Libyan Rebels Battle for Western Town
Libyan rebel forces retook the Western mountain town of Qawalish(NYT) Wednesday night after losing it briefly to military forces aligned with leader Muammar al-Qaddafi.
Egypt: Responding to thousands of Egyptian protesters in Cairo's Tahrir Square, the interim military council fired close to six hundred police officers (al-Jazeera) with ties to former Egyptian president Hosni Mubarak.
The Arab Spring has given way to a series of developments that are beginning to produce a region that is less tolerant, less prosperous, andless stable than what existed previously–and outsiders can't do much to change the course of events, writes CFR President Richard N. Haass in the Financial Times.
PACIFIC RIM: U.S. Responds to Malaysia Crackdown
The U.S. State Department voiced concern yesterday over the Malaysian government's crackdown against thousands who protested in Kuala Lumpur for electoral reform (BBC), resulting in the arrests of around 1,650 people.
Singapore: The country's economy contracted significantly (FT) in the second quarter of this year, by 7.8 percent, a result of weaker global demand and the fallout from Japan's March earthquake.
SOUTH AND CENTRAL ASIA: Bomb Blasts Rock Mumbai
Three bombs were detonated throughout Mumbai during the evening rush hour Wednesday, killing seventeen (TimesofIndia) people and injuring over one hundred and thirty. No group has claimed responsibility for the attack, but sources say it could be the work of the Indian Mujahadeen.
The attacks are likely to harden India's stance toward Pakistan in the country's upcoming "strategic dialogue" with U.S. Secretary of State Hillary Clinton, writes GlobalPost's Jason Overdorf.
Afghanistan: A suicide bomber attacked a Kandahar mosque (Dawn)during a memorial service for the assassinated half-brother of Afghan President Hamid Karzai, killing at least three people and wounding fifteen.
AFRICA: Kenya Divided Over Somali Refugees
Overcrowding at Kenya's 370,000-full Dadaab refugee camp has put the Kenyan government at odds over whether to open up a second camp for tens-of-thousands of neighboring Somalis fleeing the country'sdevastating drought (BBC).
Nigeria: The radical Islamist group Boko Haram, responsible fordaily attacks (Reuters) in the northeastern Nigerian state of Borno, said it would not consider negotiating with the government unless the military withdraws from the region.
AMERICAS: Chávez May Need Chemotherapy
Venezuelan President Hugo Chávez, who had a cancerous tumor removed three weeks ago during surgery in Cuba, said he may still need chemotherapy or radiation treatment, and indicated he will have to take a step back from governing (WSJ) and delegate some of his duties.
EUROPE: Italy to Vote on Austerity Budget
Amid skyrocketing borrowing costs and growing market concern that Italy–the eurozone's third largest economy–may fail to meet its debt obligations (DeutscheWelle), the Italian senate will vote today on an austerity budget that would implement €48 billion in spending cuts over the next three years.
Even if Italy's austerity plan discourages further speculation, afundamental reorientation of economic policy is urgently needed, writes former European commissioner Mario Monti in the Financial Times.
United Kingdom: Facing mounting pressure from the British parliament (Guardian) and the public over a snowballing phone-hacking scandal, media mogul Rupert Murdoch dropped News Corporation's £8 billion bid to takeover broadcaster BSkyB.
TRANSNATIONAL: China Overtaking U.S. as Superpower
A survey conducted by Pew Research Center's Global Attitudes Projectfound that fifteen out of twenty-two nations believe that China will or already has replaced the United States as the world's leading superpower.
It's time for the United States to learn from China's economic success, writes CFR's Elizabeth C. Economy in her blog Asia Unbound.
I am ashamed of the entire congress of the United States. This childish behavior from our elected representatives actually arguing about how to save the USA from a default. Don't the minority of Republicans remember what happened to Mr Gingrich who rode that pony before. There was a backlash. If you think that the American people don't realize what's going on, you are wrong. Throw out everyone of these politicians who won't work together for the good of the American people. If someone could tell me how to sue the congress for fraudulently misrepresenting the citizens of the USA, I would join an effort to file a class action lawsuit. Part of my concern is the United States congress borrowing from the Social Security trustfund and now crying that there's not enough money in the trustfund to last. It seems they have defrauded the citizens of this country to NOW want to cut benifits because they raided the fund. I consider that a "conspiracy to defraud the citizens of the USA".
"Behold, there come seven years of great plenty throughout all the land of Egypt:" (Genesis 41:29 KJV)
The year 2011 hasn't come to an end yet, nevertheless I must say that this is an Annus Horribilis for many countries on macro level.
While many countries struggle for stability and survival, the two camps in the Congress play chicken game. This partisan brinkmanship has already put America's creditworthiness at risk.
Is the best solution to the debt crisis for Obama to invoke the 14th Amendment bypassing Congress? Zakaria argues in his book "The Future of Freedom: Illiberal Democracy at Home and Abroad" that the legislative process has become hijacked by interest groups and that a tyranny of sorts has resulted in the American legislative process. The unelected Norquist appears to have more control then our elected representatives in the debt ceiling crisis. Zakaria argues in his book that the US Government must find ways to reform its Republic so that the harmful aspects of democracy do not subvert the Founders vision. So based on a loose interpretation of section 4 of the 14th Amendment, which states "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned," would it be best for the Executive Branch to bypass the Legislature to raise the debt ceiling? Thus doing what is best for the good of all and restoring the balance of the Republic.
The Global Public Square is where you can make sense of the world every day with insights and explanations from CNN's Fareed Zakaria, leading journalists at CNN, and other international thinkers. Join GPS editor Jason Miks and get informed about global issues, exposed to unique stories, and engaged with diverse and original perspectives.
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Check out all of Fareed's Washington Post columns here:
Obama as a foreign policy president?
Why Snowden should stand trial in U.S.
Hillary Clinton's truly hard choice
China's trapped transition
Obama should rethink Syria strategy
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