Our elites have repeatedly managed to muster up confidence in the most fundamentally unsound global economy in 80 years because to admit how deep the problems go would be to admit that our financial and political systems actually need some serious...
Here is a partial list of things Congress and the White House won’t do in response to the so-called “fiscal cliff”—the combination of tax hikes and spending cuts we’re set to face in 2013 if the Democrats and Republicans can’t agree to stop them from happening:
· Print up another trillion dollars and spend it.
· Allow sequestration to make across-the-board cuts to federal spending.
· Slash taxes for everybody and gut the military budget.
· Pass the Simpson-Bowles deficit commission plan that pundits are in love with.
· Default on the federal debt.
If you slammed a bottle of Goldschläger and went for a jog, you would come back with just as long a list of Bold Proposals. But if you took them to Washington, you would be laughed out of town, just as you would if you suggested any of the above.
What’s needed, according to the conventional wisdom, are pathetically shitty small-ball proposals—things like marginally higher taxes for millionaires or “chained CPI” accounting that slows the rate of growth of some entitlement spending. Such measures could save America a hundred billion dollars, here or there, over the next ten years or so. Also over the next ten years, a revolution in China, another economic disaster in Europe, or an all-out war in the Mideast could cost America far more, but hey, who’s counting? The purpose of tinkering around the edges of our fiscal nightmare isn’t to save money, it’s to prevent anything from really changing.
Our elites have repeatedly managed to muster up confidence in the most fundamentally unsound global economy in 80 years because admitting how deep the problems go would require admitting that our financial and political systems actually need some serious shaking up. Washington needs to reassure everyone that “the crazies,” whatever their partisan stripe, can’t be right about the need for sweeping, fundamental reform, because if they’re right, then all the Important People arguing for Important, Serious Policies are wrong.
Massive, structural reform, the definition of crazy inside the beltway, is advocated by very few insiders, and hardly anyone even talks about massive change of any kind. The exception is Nobel laureate and New York Times columnist Paul Krugman, who has insisted since the beginning that our vast, mindboggling stimulus was pathetic small-ball crap and wants much more of it. He claims that nothing short of global thermonuclear stimulus will allow us to sleep soundly, and has enough credentials that his crazy ideas aren’t laughed out of the building—though they do get routinely ignored by the people in power.
Given the results of the stimulus we’ve had, he might well be right, though not for the reasons most people would think. The biggest problem in the US isn’t unemployment being at 5 or 10 or 20 percent or whether we should recalculate the Consumer Price Index. It’s that the states are out of money.
Unlike the federal government, the state governments can’t print money. They have no Federal Reserve. When they go broke, they really go broke—they can’t even declare bankruptcy. The economic theories that reassure Washington that it can always maintain its huge deficits forever might be right, but they don’t do jack for the states, and they never will. Unless, that is, the feds accept the fact that they’re probably going to have to start bailing out some of America’s biggest states.
It’s obvious that California, for instance, isn’t going to fix its budget problems. California politics is a machine that produces unaffordable expenditures and doesn’t have an “off” switch. Nationwide, America can keep a similar machine running for a long time, since DC can just print as much money as it wants so as long as the dollar maintains the support of international financial institutions (and as long as Russia and China don’t leap to a barbarous gold standard). California can’t. Fat, meet fire.
The Krugmans of the world ought to give up on full employment and a happy economic cycle and start beating the gong for preemptive war on state defaults. Except that would get them locked up. Neither Republicans nor Democrats want to hear about bailing out the states. They have their superficial partisan reasons for that. But, more deeply, they sense what the necessity of state bailouts would reveal: just how broken our “broken system” is.
This is why nobody is suggesting the real Bold Proposals, and instead we’re arguing about what to do now that John Boehner’s pointless “Plan B” (more taxes for millionaires, chained CPI for seniors) failed to get the Republican support necessary for Obama to have to veto it. (But note that Boehner’s plan tanked because certain GOP centrists waved it off, not because of the crazies.)
One obvious way to respond to the fiscal cliff would be to let sequestration happen and lessen the blow of the tax hikes by dumping huge wage subsidies and rebates on the people—giving out money, essentially. Or we could slash every single government program—including the military—and then pump billions into the economy. We can do whatever we want, because money is just a thing we made up. But we won’t do anything that would solve our problems. Because that would be crazy.