People keep telling me our debt crisis is different than Europe’s, but I’m not convinced. Here are three things they have in common:
First, the long-term fix is politically unattainable. In the European Union, the cultural division is too deep between the comparatively hard-working, tax-paying, late retiring Germans and the less hard-working, tax-avoiding, early retiring Greeks. Some Europeans are more like the Germans. Other Europeans tend to be more like the Greeks.
Greece and a few other countries including Ireland, Portugal, Spain and Italy, have spent themselves to the point where the market doubts their ability to repay all the money they’ve borrowed. Understandably, Germany and the more hard-working countries don’t want to bail the debtor nations out.
Germany would prefer to let the debtor nations default. But then the rich people of the world and the institutions they own, including the banks, which have loaned the money would suffer. That isn’t going to happen.
In the U.S., our political division is obviously too deep to deal with our growing deficits and national debt. And the division between powerful special interests and the public interest is too deep. All politicians want to get re-elected by satisfying the political base that got them elected. A recent New York Times article showed that even the most egregious subsidy programs, for storing peanuts and cotton until prices rise, for subsidizing small economically unsustainable airports, and tax breaks for owners of Nascar racetracks, are powerfully defended and virtually impossible to end.
Defenders of the status quo say we can’t reduce the deficit on the backs of farmers, or rural America, or Nascar fans. And we certainly can’t reduce the deficit on the backs of the rich by taking away their tax breaks. That isn’t going to happen.
The second thing that Europe and the U.S. have in common is that the short-term fix, just kicking the can down the road for awhile, is attainable. The Europeans have announced a series of plans to help Greece, Ireland, and Portugal, mainly through more loans that put those countries even deeper in debt.
The most recent convoluted agreement to help Greece tries to add a “haircut” for the debt-holders to bear a bit of the cost, and tries to conceal from German taxpayers that they will now be on the hook for a bit of the Greek debt. But that’s window-dressing to try to calm the markets for awhile, with the hope that maybe, just maybe, the Greeks will hereafter become Germans.
The U.S. can kick the can down the road, too, as we did in last year’s budget compromise. R’s want to cut spending? D’s want to raise taxes? Let’s just compromise and agree to do neither! Yes, we can!
I don’t as I write know how the debt ceiling issue will resolve itself. But I’m confident that a short-term solution is within reach. It may take a bit of window-dressing, some token spending cuts and revenue enhancements, but it can and will be done. And the U.S. will be able to continue spending and borrowing.
Now here’s the good news. The third way that the U.S. and Europe are alike in their debt crises is that the small fix, just kicking the can down the road, may be good enough. We should not despair over our inability to permanently solve our respective debt crises any more than we should despair over our inability to abolish nuclear weapons that threaten us with annihilation, or the energy crisis, or global warming, or world poverty.
We should at least accept that keeping the European and U.S. governments functioning, however imperfectly, keeps the door open for progress and change. Our nations have dealt with many and larger challenges in the past. Who knows what progress may be possible in the future? Maybe we’ll find a way to harness solar energy or store wind generated power, which would dramatically lower the cost of living for everyone.
Most human progress occurs incrementally over time. And human existence has always required coping with great difficulties. Anything that gives us more time to work through our problems ought to be welcomed.