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Jeffrey Simpson

What America needs is shock therapy Add to ...

The United States has not been punished for its profligacy. Another country running its affairs the American way would have suffered by now.

Such a country’s currency would have been fed upon, its stock market would have tanked, its credit rating wrecked, its future prospects dimmed. But the U.S., as the world’s biggest economy and repository of the world’s reserve currency, has been spared what would have befallen other countries.

A multiplicity of crises is breaking over the U.S., crises that just might provide the combination of signals to wake up the country. So it might be highly desirable, in a perverse way, for a bunch of bad things to hit the U.S. simultaneously to provide shock therapy to a country too long accustomed to thinking of itself as immune from the travails of lesser countries but now beset by a series of enduring structural problems.

Which are, in no particular order: The U.S. spends way more than it raises in revenue and, therefore, borrows massively; it imports more than it exports; it has an almost double-digit unemployment rate (9.2 per cent); it has the highest degree of inequality in the Western world; its public pension plan isn’t adequately financed.

Americans can blame foreigners if they want for some of these problems – currency manipulation by China, unfair trading practices, companies shipping jobs offshore – but they’re mostly responsible for their own problems. Systematically, Americans have refused to tax themselves at levels commensurate with their spending. The result of this collective irresponsibility has finally caught up with them.

They waged wars while cutting taxes, as in Iraq and Afghanistan under George W. Bush’s disastrous regime. They let the Pentagon budget explode, raised the costs of public health care (as in Mr. Bush’s unfunded drug plan for seniors), kept the cost of gasoline below that of any Western country, left the financial sector largely unregulated until its excesses brought the economy to its knees, and designed an immensely costly and, in many respects, quite foolish Homeland Security apparatus.

Observers routinely say, as President Barack Obama did recently, that the country’s political system is “dysfunctional.” True, but how a political system operates reflects the political culture of a country. The U.S. division-of-powers system has some virtues, but it works best if there’s some willingness to work together, at least sometimes.

The chasm between Republicans and Democrats is now so wide that the system of checks and balances has produced gridlock on most issues. Nothing suggests that gridlock will ease in the 15 months before the next presidential election.

The radicalization of the Republican Party that has been proceeding apace for three decades reached its apotheosis in the Tea Party, whose view of limited government is infused with a strong sense of betrayal and loss. The Tea Party retreats into a nostalgic view of earlier times (even as far back as the Founding Fathers) when life was simpler, governments smaller, the country unchallenged, and American exceptionalism a source of pride rather than the creator of problems, including flights from reality.

The Tea Party has no coherent answer for anything. It exists to cut government and, as such, reflects a conservative view that the best way to shrink government is to starve it. Eventually, went this line of thinking, the deficit/debt problem would become so intractable that, as long as taxes weren’t raised, the only available option would be to slash spending – which is what’s happening now in Washington and at the state level.

In a sense, the Tea Party and the Republican Party have won the intellectual argument, since cowed Democrats now seem to agree that cutting spending rather than raising revenue is the only way out of the fiscal impasse.

The trouble is, without tax increases, the cuts in discretionary spending alone will still leave the U.S. a hobbled debtor nation, to say nothing of being unable to address the other challenges.

 

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