The Good, the Bad, and the Ambiguous
12:00 AM, Nov 5, 2011 • By IRWIN M. STELZER
Not that our politicians can lay the blame for the nation’s high unemployment rate and sluggish growth elsewhere. The president is in campaign mode, proposing solutions he knows Congress will reject, designed more to embarrass the Republican opposition than to boost growth. And if businessmen need any more reason to sit on their cash pile of over $2 trillion all they need do is look at the congressional supercommittee that was set up to bring the nation’s finances back to some semblance of order.
Its six members from each party are charged with lopping $1.2 trillion off the deficit over ten years. Experts say that is not enough, that a $4 trillion deficit reduction is needed if our debt is to avoid another downgrade and a possibly ruinous spike in interest rates. Unfortunately, the members are as far from agreement as ever. With the deadline for their report only 19 days away, Republicans are refusing to raise taxes, and Democrats are unwilling to make significant cuts in entitlement programs. Both, said former Republican senator Pete Domenici, are “complicit in letting America destroy itself.”
My own guess is that the supercommittee will first get Congress to postpone its deadline, and then cook up a huge batch of delectable fudge—savings from some vaguely identified future efficiencies; reductions (certain to be reversed in the next Congress) in Medicare reimbursements to doctors; unrealistically high growth and tax-revenue projections. And then announce victory, leaving Bernanke’s plea for a sensible fiscal policy to support the measures the Fed is taking to get the economy moving unanswered. He will have to wait until American voters decide whether four more years of Obama’s spend-borrow-and-tax beats a bet on whomever the Republican primary process throws up as an alternative.
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