You can't help but be depressed by the game of debt-ceiling chicken being played in Washington.
The greatest nation in the world is paralyzed by something that used to be a meaningless ritual. The nation's credit rating is at risk. Barack Obama - the man who became president because he promised to build bridges and restore America's hopes and dreams - looks helpless. In a burst of rhetorical excess, all sides are threatening disaster, depression and Armageddon. Let's just hope they don't drag us all down with them.
I used to think America would solve its problems, after all else failed. Now I'm not so sure. The political class is looking more dysfunctional than ever. This is a manufactured crisis in which hardly anyone can understand or explain the ins and outs.
The debt limit has been raised 10 times in the past decade as the country increased spending by 60 per cent. The Democrats used to vote against raising the limit when the Republicans were in charge. This time, the Tea Party started it, but everyone has tried to capitalize on the brawl. They'll probably resolve it at the last minute with a minimalist deal that kicks the can down the road, thus ensuring they can slug it out all over again the day after tomorrow.
But the underlying issues will still be there, even if the Tea Party vaporizes. Which raises the question: If they're so deadlocked over a phony crisis, how can they possibly address the real ones?
The only thing that unites the Democrats and the Republicans in Washington today is their mutual desire to suppress the truth. Nobody wants to come clean about how deep the fiscal hole really is. None of the players trying to negotiate a deal has anything to say about entitlement programs such as social security, Medicare or Medicaid. Together, these account for more than 40 per cent of all federal spending. All sides are silent on what Robert Bixby, executive director of the non-partisan watchdog group Concord Coalition, calls the underlying structural deficit. Even the toughest version of the deals on the table will shave less than one-half of 1 per cent from the entitlement spending that's mandated over the next 10 years.
These gigantic spending programs are the IED down the road for every Western nation. An aging society means the costs of these programs are set to explode. Yet, both sides in Washington cling to the magical belief that all will be well if only we adopt their simple-minded solutions. Repeal tax cuts for the rich? By all means! That would raise $700-billion over the next nine years. Unfortunately, the projected deficit over the same period is $10-trillion. Cut spending? Absolutely! But you can't have smaller government without smaller entitlement programs.
Democrats believe that more spending and tax increases will fix everything. Republicans believe that less spending and more tax cuts will fix everything. No one wants to say that benefits to aging boomers will have to take a hit, no matter what.
As it is, the U.S. is turning into a tyranny of the gerontocracy, one willing to sacrifice its grandchildren so the oldies can live comfortably in their Florida condos as they consume vast quantities of high-tech health care in a futile effort to extend their lives forever. As the thinker Walter Russell Mead puts it, the U.S. health system marries the greed of the private sector to the ineptitude of government. This health-care industrial complex will soon account for one-fifth of the economy. Most health care is consumed by seniors. This isn't a formula for national greatness.
At least economists generally agree on how to fix the entitlements mess. (Cut benefits, raise taxes.) The problem is, it's politically impossible. Where economists disagree is how to fix the jobs mess. The official U.S. unemployment rate is pleasantly deceptive, because it disguises the fact that one in five men aren't working. As Fortune's Nina Easton writes, 20 per cent of all American men are "collecting unemployment, in prison, on disability, operating in the underground economy, or getting by on the paycheques of wives or girlfriends or parents."
American companies are creating millions of jobs. The trouble is, they're not in America, which is an increasingly uncompetitive place to do business. The biggest manufacturer of electronic goods in the world is the Taiwanese-based giant Foxconn. It employs nearly a million people - that's more than the worldwide work forces of Apple, Dell, Microsoft, Hewlett-Packard, Intel and Sony combined.
The rate of job creation in the U.S. is so slow that, at the current pace, unemployment won't recover to pre-recession levels until 2020. Meantime, there are two job markets - one for the highly skilled and one for everyone else. Unlike the entitlements mess, there's no consensus among economists for how to stimulate job growth.
I've no idea how to fix these problems, or to what extent they're fixable at all. All I know is, they won't even get mentioned so long as the political class consumes itself in destructive wrangling. The greatest nation in the world is unable to address its greatest challenges. And that's the real tragedy of the faux catastrophe in Washington.Report Typo/Error
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