Wednesday, November 7, 2012

The Path Ahead

   We wish to congratulate President Obama on his reelection victory.  Early results indicate that he ran a masterful campaign and outmaneuvered his opponent.
   On another level, however, we are dismayed.  For the past several years we have seen partisan gridlock in Washington while the government ran up trillion dollar a year deficits. At one point the federal government came perilously close to defaulting on its debt.  But today we woke up to essentially the same government we had yesterday.  Mr. Obama is still president.  The Democrats control the Senate and the Republicans the House of Representatives.  In short nothing much has changed, and if it is one thing we cannot afford it is more of the same.
   The fiscal crisis is urgent and demands immediate attention.  The president appointed a bipartisan commission headed by Erskine Bowles and Alan Simpson, and the commission did produce some recommendations.  The president, however, largely chose to ignore them. Then we saw the rise of the Tea Party in 2010, and it was the intransigence of the Tea Party that resulted in the near default.
   There is no underestimating the challenge involved.  To close the budget gap and get us back on the path to fiscal sanity both the major entitlement programs and the tax code need to be overhauled.  But each program and each tax break has its own constituency, and given the pattern of influence peddling in Washington it will be difficult to enact meaningful reform.  Every special interest group will work aggressively to preserve its piece of the federal pie.
   The president needs to exercise some leadership.  He needs to propose a realistic budget, and he needs to use his bully pulpit to take his case directly to the American people.
   The Republicans need to compromise.  Granted, certain issues, such as abortion and same-sex marriage, involve fundamental moral principles and cannot be compromised.  One either thinks that they are wrong or he does not.  But the budget is about numbers, and numbers are negotiable. The obvious solution is to find some middle ground and split the difference.
   We need to face the stark reality.  There is no way that we can balance the budget and reduce the national debt without cutting defense spending and raising taxes. The numbers don't even come close to adding up otherwise.  The U.S. currently spends more on defense than the next ten countries combined.  And yet the Federal Government spends nearly twice as much money as it takes in in tax revenue.  The government spends over $400 billion a year just in interest payments alone on the national debt.  In 2010 the federal deficit was 10.7% of GDP.  Greece's was 8.1%  This is an insane way to run a government.
   What we need are leaders who put country ahead of party, and who are willing to level with the American people about the depth of the crisis.  It remains to be seen whether any of the politicians who just won reelection will rise to the challenge.


  1. You are listening to too many voices on the right.

    Most liberals are fiscal conservatives. It is just that their kind of fiscal conservatism is different from that on the right, and takes more of a long range view. Our national spending priorities ase more likely to be corrected with Obama's re-election, than if Romney had won.

  2. Part of the problem I had with Romney is that it is hard to tell what he would have done if he had won.
    If we simply take the statements that the two candidates made during the debates at face value, however, I would be skeptical of both of them. They both seem to think that if we create the right conditions for prosperity that the debt would somehow go away. Where they differed is on how they would go about it. The only thing Obama suggested was investing in education and green energy. But we have already invested a fortune in education and have little to show for it, and green energy involves investing in unproven technology, which so far hasn't worked out too well. Romney on the other hand, if I heard him correctly, thinks that lower taxes, less regulation and more drilling will do the job. He may be partially right there, but he wouldn't say what tax deductions he would eliminate, and he didn't want to cut defense spending. What he doesn't like to admit is that when Bill Clinton left office we had a budget surplus and a bullish stock market. When George W. Bush left office the global economy had nearly collapsed. Lower taxes don't necessarily create prosperity, but a mountain of debt will bury an economy.

  3. The only thing Obama suggested was investing in education and green energy.

    On the contrary, he has been offering expenditure cuts and tax increases as part of a compromise deal. He has been taking the issue quite seriously. However, politicians can't lay out their entire plans to be ridiculed by the other side; they do need to have cooperation from their opponents, so that both sides share some of the political costs.

    Romney on the other hand, if I heard him correctly, thinks that lower taxes, less regulation and more drilling will do the job.

    Bush tried that, and it was a failure. The debt grew at a rapid rate. Obama wants to get back closer to what worked in the Clinton administration.