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While Washington Sleeps, a Nation Crumbles

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Headlined to H2 7/16/13

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There's an old saying: When one door closes, another opens.

Whoever said that never worked in Washington.

The last four years have offered the federal government a borrowing and investment opportunity that's unprecedented in modern history. Interest rates have been at World War II-era levels, thanks to the Federal Reserve and qualitative easing, while investor confidence in Uncle Sam (and fears about other investments) created a situation where they were effectively paying the government to borrow money.

We could certainly use it. The official unemployment rate is more than 50 percent higher than the norm (7.6 percent versus 5 percent), and even that figure's artificially low. Long-term unemployment, youth unemployment, minority unemployment... all of them remain at staggeringly high levels, with years to go before anyone projects a normal workforce.

We could borrow the money, invest it in job creation, and be rewarded with an expanding economy that pays us back for our investment in both human and financial terms. And it's not like we'd be creating make-work. America's falling down.

There's a small chorus of writers, many of whom are published here, who take up the borrow-and-invest refrain on a fairly regular basis. Today the topic is deftly addressed by Barry Ritholtz, business columnist for the Washington Post, who writes that "the era of cheap credit may be nearing its end. And thanks to a dysfunctional Washington, D.C., we are on the verge of missing a once-in-a-lifetime opportunity."

Ritholtz notes that now, as in our highways and bridges are crumbling, adding: "The electrical grid is a patchwork of jury-rigged fixes, vulnerable to blackouts and foreign cyberattacks. The cellular network of the United States is a laughingstock versus Asia's or Europe's coverage."

And Ritholtz, whose beat includes investment, notes that these historically low rates have "begun to move higher as markets anticipate the end of the Fed's quantitative easing." Ritholtz concludes that "we still have a window to take advantage of these historically low rates. However, that window is beginning to close, and we need to act sooner rather than later."

(His column is well worth reading in full.)

While Washington sleeps, America crumbles. Why? How have we allowed that to happen?

The short version is this: The American people have been subjected to a bait-and-switch routine on a massive scale. The national debate should have centered solely on how much to borrow, where to invest, and how to divide the investment among the plethora of worthy projects dotting the American landscape.

Instead we were treating to the bread-and-circuses spectacle of "Deficit Commissions," debt hysteria, and a cult of economic austerity that demanded spending cuts across the globe despite the utter absence of real-world evidence for its harsh and untested prescriptions. When the evidence finally did come in, it showed that austerity's effects were as devastating as the Keynesian economists had predicted.

Austerity prevailed anyway.

This series of debacles should have spelled political doom for the extremist anti-government Republicans, whose political philosophy was utterly discredited twice: first by the 2008 crisis, then again by the devastating effects of austerity on Europe.

The Randian revenant was struck down twice, only to rise from its grave victorious.

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http://www.huffingtonpost.com/rj-eskow/the-dumbest-bipartisa

Host of 'The Breakdown,' Writer, and Senior Fellow, Campaign for America's Future
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