The Economist has a pretty good article out about the similarities between our economic mess and Europe’s. They get it right on many issues, and completely wrong on others but its well worth reading.:
FOR the past three years America’s leaders have looked on Europe’s management of the euro crisis with barely disguised contempt. In the White House and on Capitol Hill there has been incredulity that Europe’s politicians could be so incompetent at handling an economic problem; so addicted to last-minute, short-term fixes; and so incapable of agreeing on a long-term strategy for the single currency.
Those criticisms were all valid, but now those who made them should take the planks from their own eyes. America’s economy may not be in as bad a state as Europe’s, but the failures of its politicians—epitomised by this week’s 11th-hour deal to avoid the calamity of the “fiscal cliff”—suggest that Washington’s pattern of dysfunction is disturbingly similar to the euro zone’s in three depressing ways.
The author lists many reasons why we are now similar to the European mess but the main one is the fact that even though we can see the train coming at us we are doing nothing to get out of the way. Nothing:
Rather than facing an imminent debt crisis, as many European countries do, it needs to deal with the huge long-term gap between tax revenue and spending promises, particularly on health care, while not squeezing the economy too much in the short term. But its politicians now show themselves similarly addicted to kicking the can down the road at the last minute.
…the temporary fix ignored America’s underlying fiscal problems. It did nothing to control the unsustainable path of “entitlement” spending on pensions and health care (the latter is on track to double as a share of GDP over the next 25 years); nothing to rationalise America’s hideously complex and distorting tax code, which includes more than $1 trillion of deductions; and virtually nothing to close America’s big structural budget deficit. (Putting up tax rates at the very top simply does not raise much money.)
The author writes that each sides extremists prevent any real negotiation but this is where they get it wrong. Republicans were willing to wheel and deal, making concessions on tax hike. But we wanted spending cuts in return. His Majesty would hear none of it. He wants tax hikes and only tax hikes. In fact he wants to increase spending. As Krauthammer called him, he is a “pre-Clintonian tax-and-spend Democrat”
Lastly The Economist writes that one major similiarity with Europe is the fact that none of our leaders are being honest:
The third parallel is that politicians have failed to be honest with voters. Just as Chancellor Angela Merkel and President François Hollande have avoided coming clean to the Germans and the French about what it will take to save the single currency, so neither Mr Obama nor the Republican leaders have been brave enough to tell Americans what it will really take to fix the fiscal mess. Democrats pretend that no changes are necessary to Medicare (health care for the elderly) or Social Security (pensions). Republican solutions always involve unspecified spending cuts, and they regard any tax rise as socialism. Each side prefers to denounce the other, reinforcing the very polarisation that is preventing progress.
Oh please. Republicans have been out every day telling Americans we are in a huge mess, and many of the Republican leaders have offered specific fixes and spending cuts. Such as Paul Ryan:
But the Democrats tell us that all we need to do is tax the rich and spend more.
Rick Santelli echoes the same thoughts when he pointed out that the Republicans are the only responsible voice in Washington right now because we are the only ones trying to call attention to the out of control government spending while the Democrats just want to spend, spend, and spend some more.
But hey, we could always just print more money, or mint a new coin right?