Who is Ted Cruz and how did he nearly crash the US government?

Ted Cruz, a first-term senator from Texas, took the US government to the brink of disaster. He has paid a high price in credibility, but he wasn't always a punchline.

On Wednesday evening, America held its collective breath. Not for a Presidential proclamation or a vote in Congress. In fact, all signs indicated that finally a deal had been reached that would pass a vote in both houses on Capitol Hill, and that the President would sign.

No, America held its breath waiting to see if a first-term senator from Texas, the increasingly erratic Ted Cruz, would try to single-handedly scupper the whole thing by filibustering the Senate vote on the deal to raise the debt ceiling and finally re-fund the government. Was he bluffing?

Of course he was. The Democrats – and the vast majority of moderate Republicans who support them – were holding all the cards. The defeat, when it came, was humiliating for the right-wing Tea Party faction that had been holding out against Obamacare. The government is re-funded, and the debt ceiling is raised. Polls show that the American people never supported their wild and mad crusade, and the mainstream of American media mocked him. John McCain, Cruz's Senate colleague, the man who put Sarah Palin on a Presidential ticket, mocked the comparisons Cruz was making that people who supported the Affordable Care Act were like Chamberlain appeasing the Nazis. Everyone mocked him. The Houston Chronicle, his local newspaper, publicly withdrew its endorsement of him this week.

But Ted Cruz wasn't always a punchline.

One year ago he was riding a tremendous political wave. He had just achieved one of the biggest upsets of the year when he beat sitting liutenant-governor of Texas David Dewhurst in the Senate primaries with a plucky long-shot campaign that came out of nowhere. The news website Mother Jones called him “The Republican Barack Obama” in December 2012, once he had cruised to victory in the election in November. Right up until this summer he was being hailed as the potential saviour of the Republican party.

His career had already been impressive, if not high-profile, when he entered the primary race. The first Hispanic ever to be a clerk to a Supreme Court Justice, he also served on the legal team fighting Bush v Gore after the 2000 Presidential election. When he was appointed solicitor-general of Texas in 2003 he was the youngest in America. But he was by no means a well-known figure when he launched his campaign, inauspiciously, in a conference-call to bloggers. Conservatives applauded his entry in the race, but most thought Dewhurst nonetheless had it in the bag.

They were wrong. Cruz soon started attracted the attention of powerful allies – including the Tea Party, who endorsed his campaign. The conservative blog Red State described him as a man with “the battle scars to show he is ready to go to Washington and fight to take our country back from the establishment.”

Quickly gathering steam, he outflanked Dewhurst on the right, beating him to a virtually assured seat in the Senate by a humiliating fourteen points.

Rafael Edward Cruz was born in Alberta, in Canada, to American parents who worked in the oil business. His father, also called Rafael, originally fought for Castro in the revolution, fled Cuba in 1957 after falling foul of the regime, and is now a pastor, with copper-bottomed conservative credentials. His father turned out to be one of Cruz's best political assets in his campaign for the Senate. A profile in the National Review earlier this year described how Cruz senior contributed as both a strategist and a speaker, and won the admiration of some seriously big names, including that behemoth of conservative radio, Rush Limbaugh.

With his father's help, Ted Cruz's rise from outsider to Tea Party darling to Republican rising star was meteoric. So what happened? How did we get from that Ted Cruz to the man who, in the first act of the budget negotiation drama, cast himself in the role of court jester, with a bizarre 21-hour epic speech on the floor of the house which included the Senator reading from Green Eggs and Ham and quoting from reality TV show Duck Dynasty? To the Senator whose Tea Party faction has been holding the nation's federal budget hostage, and threatening debt default if Obamacare wasn't de-funded – and who has led his party into a humiliating defeat?

There were warning signs. Cruz cosied-up to Tea-party conspiracy theories during his campaign. He spoke out against what he described as the dangers of Sharia law, and published an article on his campaign website in which he made clear that he thought George Soros – Glenn Beck's bête noir - was plotting with the United Nations to abolish, of all things, golf courses. The seeds of this shutdown, of this defeat – of Green Eggs and Ham – were clearly sown back in the campaign, when Cruz began to suckle at the Tea Party teat.

The ironic thing is that this should have been a victorious moment for Cruz and his faction. The roll-out of Obamacare happened in the last two weeks quietly, in the background, behind the headlines about the shutdown and Congressional gridlock. If he had not been showboating, Cruz and his allies could have pointed to the technological bugs that plagued the policy's launch. Instead, by fixating on de-funding the law above all else, Cruz not only missed that opportunity, but also any chance Republicans might have had to make other arguments during the budget debate; reducing the deficit, for example. The public opinion game was lost. In an ABC News poll on 14 October, 74 per cent of respondents disapproved of the way the Republicans had handled the crisis, of whom 54 per cent “strongly” disapproved.

It is theoretically possible this is all part of Cruz's plan, perhaps for a run at the 2016 Presidential nomination as an outsider, an anti-Romney. Even while moderates urged him to change focus and dial down the rhetoric, his Political Action Committee, which raises funds for his political campaigns, has increased nearly threefold.

Forcing the shutdown and fighting party moderates over Obamacare may not have been popular with independents, or even with moderate conservatives, but with the extreme rump of the party it has unsurprisingly played extremely well. The Washington Post reported on October 11 that a straw poll of favoured 2016 Presidential candidates taken by Family Research Council Action which is seen as an important early indicator of right-wing preferences for a Republican candidate, saw Cruz win with 42 per cent of the vote, a double-digit lead over the next-nearest winner. The poll is. After two disastrous Republican Presidential candidates who were seen by the party as moderates, it is possible that Cruz is hoping the party will want to select a hard-liner this time.

But, if the six times he was heckled at the Straw Poll presentation are anything to go by, things are not going entirely to plan. He has made enemies of his own party, and is considered a joke by Democrats and the media. “If this man can get the nomination to be the Republican nominee for president,” said Harry Reid, the Senate majority leader this week, “then I pity the Republican party.”

Cruz, in the end, was bedazzled by the adulation of the Tea Party. He made his grab for the fame and headline profile of figures like Michelle Bachman or Sarah Palin, and got it. Only now, as the dust settles, he is finding he has paid a high price in credibility.

It is a dark sign for America's fractured politics that Cruz might yet be vindicated. He's vowed to fight on to de-fund Obamacare. The government is only funded until January. The debt ceiling crisis is only postponed until .

Cruz and the Tea Party may be down, but they aren't out yet.

 

Ted Cruz speaks to the media after meeting with Republican senators on 16 October 2013. Photo: Getty

Nicky Woolf is a freelance writer based in the US who has formerly worked for the Guardian and the New Statesman. He tweets @NickyWoolf.

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The Asian Financial Crisis 20 years on

In the four years between 1993 and 1996 the tiger economies of Asia led the world in terms of gross domestic product (GDP) growth and stock market returns as foreign and local investors piled in and embraced the opportunity.

In the four years between 1993 and 1996 the tiger economies of Asia led the world in terms of gross domestic product (GDP) growth and stock market returns as foreign and local investors piled in and embraced the opportunity. But trouble was brewing and Thailand was the canary in the coal mine. Strong growth was being funded by ever increasing levels of debt and with offshore interest rates far more attractive than those available at home, US dollars became the funding currency of choice.

While currencies remained pegged to the US dollar risks were minimal but as a growing trade and current account deficit and rising inflation led to increasing overvaluation of the Thai Baht, speculation grew and short-term money started to move out of the Thai currency.

In July 1997, after a futile attempt to stem the outflow, the Thai central bank removed the peg triggering an immediate 25% fall in the currency - by the end of the year it had lost half of its value. The impact on the economy was devastating. Interest rates initially spiked making dollar debt significantly more expensive. Loans started defaulting, peaking at almost 50% of total loans in 1999. The figures reflect the severity of the downturn: GDP took five years to return to pre-crisis levels, consumption – the use of good and services by households - was four years, and private sector loan growth only returned to positive territory in 2002.

Although Thailand was the trigger, the ticking time bomb of unhedged foreign currency debt and a  prolonged period of over-exuberance prevailed across all of South East Asia.  The Philippines and Malaysia were also significantly impacted but the most significant downturn occurred in Indonesia, which, although running a current account deficit only half the size of Thailand, saw its currency go from 2000 rupiah to the US dollar to 16000, and bank loan books fill up with defaulting loans.

Contagion and a severe lack of confidence dented the whole region and although Hong Kong managed to hold on to its peg to the US dollar, a prolonged period of high interest rates and slower growth resulted in a 40% fall in residential property prices and a deflationary period that took many years to recover from. Even South Korea, which was the 11th largest global economy at the time, had to call in the International Monetary Fund (IMF) as interest rates ballooned and the currency weakened.

The recovery, which on average took more than 5 years, was supervised by stringent IMF requirements and has put Asian economies on a much firmer footing. With a few exceptions Asian currencies are free floating, meaning their value is determined by the foreign exchange (forex) markets through supply and demand, and as a result they have much more flexibility to reflect domestic economic cycles ensuring that pressures don’t build. Current and trade accounts, with the exception of India and Indonesia, are now in surplus, with the practice of unhedged foreign borrowing all but ended. Short term foreign debt in ASEAN (the Association of South East Asian Nations) nations has dramatically dropped from 160% to now less than 30%.

The Global Financial Crisis (GFC) in 2008 was borne out of exuberance in the West but not in the East and although Asian economies were impacted by the slowdown in global growth, Asian economic credibility was never called into question.

The only economy that is showing a worrying trend is China. A credit boom following the GFC has seen debt-to-GDP balloon from 160% in 2008 to 260% in 2017. The nature of this debt however is different from that accrued by South East Asian Countries in the late 1990’s. Firstly, most of the debt lies with state owned enterprises (SOEs) and is hence backed by the >$3tn worth of foreign exchange reserves, and most of it is denominated in renminbi. Secondly, although China operates a managed exchange rate regime against a basket of trading currencies, the capital account is closed which restricts the amount of speculative flows. Finally, a lot of the debt is owned by domestic institutions and is long term in nature which reduces the likelihood of enforced withdrawal leading to a liquidity crisis.

The impact of the Asian crisis lives long in the memory of Asian corporates. The days of rapid expansion and growth for the sake of growth have gone and been replaced by conservatism and a focus on cash flow and profitability. Corporate debt levels are at all-time lows while cashflow compares favourably to any other region of the world. Interestingly it is developed economies that are now showing the stresses Asia encountered and recovered from 20 years ago; Asia in comparison looks favourable.

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