While all this squabbling continues, your house burns to the ground
and the fire has now spread to your neighbors' homes. But because
everyone is preoccupied with the wrong question (the long-term water
supply) and the wrong solution (saving water now), there's no response.
In the end, the town comes up with a plan for the water supply over the
next decade, but it's irrelevant because the whole town has been turned
Okay, I exaggerate a bit, but you get the point. The American
economy is on the verge of another recession. Most Americans haven't
even emerged from the last one. Consumers (70 percent of the economy)
won't or can't spend because their major asset is worth a third less
than it was five years ago, they can't borrow as before, and they're
justifiably worried about their jobs and wages. And without customers,
businesses won't expand and hire. So we're trapped in a vicious cycle
that's getting worse.
But the government won't come to the rescue by spending more and
cutting most peoples' taxes because it's obsessed by a so-called "debt
crisis" based on budget projections over the next 10 years. That
obsession -- which serves the ideological purposes of right-wing
Republicans who really want to shrink government -- has even spread to
the eat-your-spinach media, deficit hawks in the Democratic Party, and a
major (and thoroughly irresponsible) credit-rating agency that's
neither standard nor poor.
Meanwhile, some lazy (or misinformed) commentators are linking our
faux debt crisis to Europe's real one. But the two are entirely
different. Several European nations don't have enough money to repay
what they owe their lenders, or even pay the interest. That's
threatening the entire euro-zone.
But there's no question that the United States has enough money to
pay what it owes. We're the richest nation in the world and we print the
money the world relies on. The only question on this side of the pond
is whether tea-party Republicans will allow America to pay its bills
when the debt-ceiling fight resumes at the end of 2012.
Europe is scared of what's happening in the United States -- but it's
not America's faux "debt crisis" that's spooked them. It's the slowdown
here (and the likelihood of another recession), made all the worse as
our debt obsession prevents the U.S. government from doing what it
should. A slowdown and recession here mean fewer exports from Europe to
America. When combined with their genuine debt crisis, this could push
Europe's economy over the edge.
The most important aspect of policy making is getting the problem
right. We are slouching toward a double dip because we're getting the
problem wrong. Despite what Standard & Poor's says, notwithstanding
what's occurring in Europe, and regardless of U.S. budget projections
years from now -- our current crisis is jobs, wages, and growth. We do
not now have a debt crisis.
Every time you hear an American politician analogize the nation's
budget to a family budget (as, sadly, even President Obama has done),
you should know the politician is not telling the truth. The truth is
just the opposite. Our national budget can and should counteract the
shrinkage of family budgets by running larger deficits when families
Americans are more frightened, economically insecure, and angrier
than at any time since the Great Depression. If our lawmakers continue
to obsess about the wrong thing and fail to do what must be done -- and
they don't explain it to the nation -- Americans will only become more
fearful, insecure, and angry.
We are slouching toward a double dip, with all the human costs that
implies. We don't have to be. That is the tragedy of our time.