OK, clearly there is a US debt problem. There’s a problem because the world economy is being held hostage by a fanatical faction of US politics which is morbidly obsessed with the national debt. But there isn’t a debt problem the way someone who’d maxed out their credit card has a debt problem.
The US can amply pay its bills. As has been pointed out before, if Congress does nothing for the next five years, deficits will disappear of their own accord. Just failing to renew the “temporary” Bush tax cuts will wipe out most of the deficit at a stroke. The reason we are having this debt crisis in the US isn’t because market events beyond the control of policy-makers have forced the situation. That’s the case in Europe, but in the US it’s the opposite: policy-makers, in the form of House Republicans, have used their control of events to force a critical situation on the markets.
I think a major tactical mistake of the Obama administration in this fight has been to accept the Republican party’s terms about this. I’m sure the White House is fully aware that this is a fight that the Republicans have chosen to have, but they seem to be doing that JFK thing of seeing “crisis” as embodying both “danger” and “opportunity”.
Listen to Obama’s speeches and it’s clear that he has looked at the US’s long-term demographic problems–an ageing population, rising retirement and healthcare spending–and decided that this is a good moment to set the country on a better path and start to bring those long-term revenue and spending lines back together. If Republicans are going to force him to deal with America’s fiscal problems, then by gosh he’ll deal with America’s fiscal problems.
That’s all so sweet. It reminds me of another Democratic President, who had some high-stakes battles with a Republican House, went to the wire a few times, but managed to enact a package of fiscal reforms that eventually delivered budget surpluses by the end of his time in office.
And when Bill Clinton left the White House and George W Bush came in, the administration looked at these surpluses and declared them a bad thing. Vice-president Dick Cheney famously declared that deficits don’t matter. And they enacted two massive tax cuts, started two unfunded wars and introduced one ruinous pharma industry giveaway to spend all that lovely money. Throw in the effects of the recession they started, and you’re back to where we are today.
This is like a political version of the omnipotence paradox: can Congress build a political rock so heavy it can’t overturn it? Obama appears to want to set in train a long-term solution to America’s fiscal problems, seeing that a feckless Congress is not up to the job. But the problem here is ultimately not America’s fiscal problems, but the fecklessness of Congress. Solve the problems, and Congress or another administration can just come along and remake them again.
Salty hair 