I was invited to go to this Peterson event in downtown DC, but was sick and so I missed it. Not, I must confess, that I was eager to listen to twenty-five mostly-Silent (born 1925-1942) high muckety-mucks all the say the same thing… at great length and at great detail… about the deficit. Believe me when I say: I have heard it all before. WP columnist David Broker, an honest good-government type (and also a Silent), gives a pretty good account here of what actually transpired. And a pretty good assessment of this commission’s poor odds of success. Alan Simpson put it right in his usual humorous style: “a suicide mission.”
I’m inclined to think that this vast fiscal impasse will become a very important component—if not, when the bubble bursts, the actual crux—of the emerging Fourth Turning (Crisis).
As an issue, it has all the prerequisites. It is something everyone has long known was coming, but also something that everyone just preferred not to think about. It is something which, if left unsolved, will surely result in disaster. Yet it is also something which, in order to solve, requires huge changes in habits and behaviors, and in long-term winners and losers, throughout America. And this is the key point: One could, in theory, imagine solutions that would involve completely different winners and losers, and realize completely different visions of America’s future, that is, in terms of its political economy. At one extreme, for example, you solve it all by just cutting taxes—a lot. Or at the other, by just cutting benefits—a lot. And you have a polarized [Prophets] archetype running the country that has divided itself (I’m speaking now of its most engaged and passionate leaders) into two largely irreconcilable camps. Each camp has its own vision. And each camp already believes that its own corner solution is inadequate: In other words, many in the GOP want a balanced budget with *less* government spending than now; and many Democrats want a balanced budget with *more* government spending than now.
Even aside from the psychology of the Prophet, it’s perfectly understandable why one side or the other will never feel that the moment is quite right to settle on a long-term solution. Each side wants to go to work when it’s on top. The GOP feel, reasonably, that hey why not wait for a couple of years until we get a new commission in which *we* outnumber *them.* Similarly, not many leading Democrats were eager to join a commission set up by George W. Bush.
The bickering and gaming continue as the new recession has hugely speeded up the disaster deadline—like turning on all the boilers in the Titanic’s engine room while the iceberg looms. We’re in real trouble.
Let me further add that it’s not just happening to us, but to every other major economy in the developing world. Just look at the per-GDP public debt in Japan, or the headlines about Greece (are Spain and Italy and the rest of the “Club Med” next?) The trigger to the chain reaction is unlikely to start with us. But, once the chain reaction starts, we may be a big part it.
If any of you are interested in the global fiscal situation, here is a just-released report (http://www.bis.org/publ/work300.pdf?noframes=1) by the Bank for International Settlements (“The future of public debt: prospects and implications”). These are bankers giving advice to other bankers. Their language is typically very dry and cautious. But they use words like “daunting” and “frightening” in this report.