Over the next two weeks, a majority of Democrats and Republicans on the twelve-member supercommittee on fiscal reform will have to agree on how to reduce the US federal deficit by over $2 trillion over the next decade. Smart money bets they’ll fail, setting the stage for another attack on the credibility of the US dollar and sustainable economic recovery.
It sounds smart to say Washington is dysfunctional. However, it’s wise to remember that when Washington is cornered, it usually acts.
Economist Robert Samuelson succinctly lays out why the committee’s assignment transcends pre-election partisan interests:
“Since 1971, federal spending has averaged 21 percent of national income (gross domestic product). Even with aggressive cuts, spending may never again fall this low. The reason: the surge in retirees. Meanwhile, taxes averaged 18 percent of GDP over those years, leaving average annual deficits of 3 percent. The take-away for both liberals and conservatives is repugnant: they need to identify the most justifiable spending cuts -- lots of them -- and the least damaging tax increases, which will still be sizable.
“They need to come clean with reality. For years, they’ve exuded self-serving platitudes. Conservatives should acknowledge that Big Government is a permanent part of the social fabric and that much of what it does is popular. It needs to be financed. Liberals should concede that Big Government can become so big that its crushing taxes weaken the middle class and economic growth. Government then promotes conflict and degrades social justice.
“The supercommittee cannot solve America’s budget problems with one sweeping plan. It cannot remedy runaway health costs or streamline the complex income tax. These large tasks will be left to the next president and Congress. But it can elevate popular understanding by proposing a plan justified by a vision of government’s collective responsibilities and the public’s reciprocal obligations.”
Click on: www.realclearpolitics.com/articles/2011/11/07/budget_fairy_tales_left_and_right_111957.html
A $2 trillion deal needn’t be unpopular with the general public. When Americans are worried about the future, they don’t turn down solutions in favor of waiting for Christmas.
A decade-long plan that shares the pain and enhances confidence in the future of the US economy and the country’s credibility internationally can be accepted. A half a dozen blue-ribbon studies have already outlined its main features. A deal now that meets the modest expectations of the experts—and the market—could even improve Congress’ dismal approval ratings, now just hovering above single digits.
Lifting the economy and Washington’s standing, of course, would lift the electoral prospects of the president as well.
So, a deal that compromises and mutes the use of “self-serving platitudes” will not be universally well received by election planners, partisan wordsmiths, fundraisers, and presidential aspirants.
Republicans would no longer be as convincing when promising no-new-taxes and labelling their opponents as “class-warriors,” and Democrats would have to relax their rhetoric on the boundless healing powers of wealth taxes.