Soon, the United States will either have defaulted on its debt obligation or we will have cobbled together some last-minute plan that is more a desperate gambit than well-thought-out solution.
Democrats and Republicans have coherent explanations for why the other party is responsible for our being in hock over our necks, about why each plan to raise the debt ceiling is or isn’t good, or honest or fair, or in the best interests of the country, and about why the other party is being unreasonable and irresponsible and just playing politics in anticipation of the 2012 election.
According to the Democrats, the Republicans are to blame for our annual deficits and staggering debt. The GOP selfishly cut taxes on the wealthy, foolishly started a couple of unwinnable wars, and deregulated the financial industry, which invented a bunch of esoteric investment vehicles that led to the inflation and implosion of the housing bubble. That brought the world economy to its knees. Then the Republicans had the audacity to bail out the Wall Street institutions that caused the problem because they were supposedly too big to fail.
Democrats argue that we can’t ignore the plight of Main Street and senior citizens during a recession and can afford to help them if we raise taxes and cut spending on things like national defense.
Republicans counter that Democrats are responsible. They pulled the rug out from under the shah of Iran and stood by while the Ayatollah Khomeini returned from France. They ignored the gathering threat of radical Islamic fundamentalism, thus allowing it to culminate in the attacks of Sept. 11. The wars in Afghanistan and Iraq are one-time expenditures necessary to clean up that mess. The housing bubble was caused by a Democratic decision to have Fannie Mae and Freddie Mac make mortgages available to unqualified buyers. The stimulus and “Obamacare” are the latest examples of massive, unaffordable, ineffective and intrusive government programs that are driving us to ruin.
Republicans argue that we have promised more than we can pay, cannot sustain the spending course we are on, and if we don’t cut spending now, we are destined for economic disaster and won’t be able to help anyone.
There is some truth and fiction in both narratives and both are incomplete. We are all to blame to some degree. Including we the people. We deny painful realities, avoid difficult choices, and seek the easy way out. We tend not to thoughtfully plan and instead viscerally react. We don’t keep our resolutions. We are overextended at all levels: federal, state, local and personal.
At their core, the two narratives reflect fundamental differences of opinion about the respective roles of government and individuals to provide for people’s welfare. Republicans prefer a smaller role for government and a larger role for individuals. Democrats seem to prefer the reverse. I am not sure that difference in values can be reasoned away.
Fortunately, we have good institutions and processes to help us overcome our shortcomings and differences. But even they require some willingness to compromise in order to work. Especially when, as now, we are confronted with a crisis, our country is pretty evenly divided on how to address it, and that division is reflected in the lack of a governing majority in our representative government.
I believe we are overextended and on an unsustainable course. We have to make big cuts, but thoughtfully and with an eye toward avoiding large, unanticipated transaction costs. To that end, the military base closure commission may be a good model for a mechanism. Congress sets the general dollar goal and delegates the job of making specific, difficult cuts to a panel that is more insulated from political pressure.
We have to start in the right direction and stay the course. Agree to make $2.5 trillion of cuts in government spending. That’s less that the $4 trillion the credit rating agencies are seeking. The cuts will be difficult and painful. To get through them, we will need leadership and a willingness to work together and share the burden. We should try to make something positive out of it. We have just been through a binge of bling. It might not be bad to take the opportunity that the crisis offers to make some changes.
As individuals, we could be less wasteful, less focused on material things, conserve our resources, get more involved in our community, and help our neighbors. Corporate America could engage in some self-discipline and moderate the wide disparity in its compensation structure. It could agree to some reasonable financial regulation. It could move away from disposable, homogenized culture.
In the process of downsizing, government could revise the tax code so that it is simple and progressive, reform our immigration system so that there are two routes to legal status, merit and humanitarian. It could revitalize our cities, discourage urban sprawl and malls in favor of more sensible forms of urban planning. It could change the incentives on our transportation sector to favor the most efficient mode for each transportation need. It could institute two years of mandatory, universal public service after high school.
With leadership and a willingness to cooperate and work together, we can weather this crisis and emerge renewed and improved.