In 2011, the economy has for the most part been chugging along. True, the news have not always been good, but as of late consumer confidence, industrial production and unemployment have been trending in the right direction.
That is, until our elected “leaders” decided to organize a chicken race over the federal budget. The unseemly spectacle over the debt ceiling and the following Budget Control Act of 2011 on budget cuts and taxes did nothing but postpone the important decisions, and create more insecurity both domestically and overseas. For a Eurozone suffering both slow growth and bailouts of underperforming countries like Greece or Ireland, this was not good news at all. The last weeks events have increased the risk of a second recession.
So, what needs to be done? It is a demographic fact of life that the population is aging, and will require more health care. This will put cost pressure on programs like Medicare and Medicaid. Long term the budget must be balanced, which can only be done by tax increases and/ or reduced spending. Not doing anything is not an option, politicians must step up to the plate and start making the difficult decisions. There can be no holy cows, everything must be scrutinized: defense spending, agricultural subsidies, education, all manners of entitlements, housing programs, a new value added tax, and so on. An honest discussion along these lines will unto itself have a calming effect on the financial markets. Nobody expects the problems to be solved immediately, but everyone expects something to be done.
Finally, to call the proceedings between Republicans and Democrats a negotiation is a stretch. As the dean of the Kellogg School Sally Blount points out in a recent blog entry “For anyone who has studied negotiations in organizations in any depth, it’s clear that the organizational structures, prevailing culture and job incentives that now make up our political process are not effective. With a public stage always ripe for grandstanding, an embedded culture of partisanship, and a lack of clarity regarding facts versus opinions in debate, the strategies for effective negotiations that we know work are just not possible here.” http://www.kellogg.northwestern.edu/Dean_Blount/blog/whither-washington.htm
Clearly there are political changes needed. I have always wondered why the US stubbornly sticks to a two- chamber parliament? Why not follow the example of many modernizing economies, and put emphasis on the proportionally elected House of Representatives? Giving them broader authority and longer terms would enable more responsible politics, and better accountability to the voters.
