Yesterday Sheila Bair published a good summation of the problems our politico-economic focus on the short term has yielded.
That's true, in spades, with political tension growing over the approaching default on the U.S. debt, while neither major political party has yet been willing to pull its head out of the sand (or wherever else it may be lodged) to honestly address key long-term issues.
On the Republican side, the key sticking point at the moment is "no taxes." That's just plain dumb. Tea-party novices made rash promises to get elected, and other Republicans jumped on the Grover Norquist anti-tax bandwagon. Now they all realize how impossible those promises were, and that failure to deliver on them might turn some of them out of office in 2012. Ultimately, this stone wall will have to cave.
On the Democratic side, there is strong resistance to any changes in social security and medicare; in fact, Pelosi and company appear to be staking their entire election campaign on maintaining the status quo in these entitlement areas. Here again, the position is untenable, promises are going to have to be broken, and politicians fear the consequence to themselves. This fortress is going to be breached as its weak foundation crumbles.
Who's concerned about the long term? Well, Obama (finally) appears to be looking that direction by proposing some cuts in entitlements, but can't get the support of his own party. Give Boehner and Cantor some tiny credit for seeming to lean in that direction too, briefly, conceding some tax increases and even looking prepared to snip a lock of hair off their sacred cow, military spending. But they quickly succumbed to the fear factor too.
Each side dreams that next year's elections will sweep it into a controlling majority in the House and Senate, with a President of their own party in the White House, obviating compromise or negotiation on their current platform. Yet when those favored policies are so seriously flawed, such an outcome would be unhealthy, if not disastrous, for our long term economic and political health. Fortunately, the actions of politicians in the current squabble almost guarantee that such an outcome is unlikely, and to hope for it, unrealistic.
I think the issue of the nation's debt ceiling will be resolved in a last-minute frantically-negotiated deal. I hope it will, because I truly fear the consequences to the economy if it isn't. Pundits clearly think it will, because I haven't seen any of those "how to prepare for the coming economic collapse" articles in the press yet. But the downside of that is it's looking increasingly as if the settlement will be short-term, and we'll be revisiting this same divisive, time-wasting issue again within a year or so. We badly need the longer-term solution that blew up on the launching pad last week. Even that is but a down payment on what needs to be done.
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